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12/11/13 14:21

Parliamentary statement on Common Agricultural Policy Budget

Richard Lochhead
Scottish Parliament
November 12th 2013

I am grateful for this opportunity to update Parliament on developments relating to farm payments and rural development funding from 2014 – following the UK government’s announcement of 8 November on the Common Agricultural Policy budget allocations for the devolved administrations.

As I know the Chamber appreciates, Scottish farming is deeply dependent on Common Agricultural Policy payments – to help our farmers compete, remain viable, support our rural economy and, of course, put food on our tables and care for our environment.

The CAP budgets also support wider rural development and environment schemes the length and breadth of Scotland.

The economics of our agriculture – and the environmental and other benefits it brings – all depend on the CAP.

Earlier this year, the EU set its 7-year budget framework for 2014-2020.

This included member states’ allocations under the CAP’s directfarm payments – known as Pillar 1 – the rural development – known as Pillar 2.

At the time, the Scottish Government was deeply disappointed with the deal negotiated by the UK given Scotland’s demands for a fairer share of the EU budgets.

However, since we have known the wider CAP budget at EU and UK level, all that remained was for the UK to announce the internal UK split.

On Pillar 1, Europe adopted a formula called ‘external convergence’. This increased the payments per hectare for all member states below a threshold – set at 90% of the EU average. In addition, Europe said no member state should end up with an average of less than €196/ha.

Had Scotland been a member state, Scottish farmers and crofters would have received the full benefit of external convergence - an extra €1 billion – that’s 850 million pounds - over the seven years, because our average per hectare is well below the threshold.

As part of the UK, Scotland’s low average is offset by the averages of England, Wales and Northern Ireland.

As a result, the UK as a whole received what can now be confirmed as only €223 million from external convergence.

However, despite our historically low share of funding, there was a chink of hope for Scotland.

England, Wales and Northern Ireland all have payment levels above the EU’s threshold. It was therefore clear that the UK’s uplift was a direct result of the low payments in Scotland.

In other words, were it not for Scotland, there would be no uplift for the UK – so, in the interests of justice the UK’s convergence uplift should therefore come to Scotland.

In a debate here on 1 October, it became clear that other parties shared this view.

And on 14 October, in an unusual step, illustrating Scotland’s unassailable case, rural affairs spokespeople from Labour, the Conservatives and the Liberal Democrats, and myself, wrote a letter on this to Owen Paterson at Defra.

However, in his announcement last Friday, Mr Paterson delivered a slap in the face for Scottish agriculture by deciding that the uplift will not be allocated to Scotland after all.

Instead, he divided it among all parts of the UK – even though England, Wales and Northern Ireland are already above Europe’s threshold.

Presiding Office, Mr Paterson decision represents a gross injustice and .

As a result of this decision, Scotland’s Pillar 1 will fall from €597m in the 2013 scheme year, to €580m in 2014, before recovering slightly to €587m in 2019.

This is a drop of 1.6% in cash terms between 2013 and 2019, and an even bigger drop in real terms.

Scotland will now receive just over 16%, rather than 100%, of the external convergence money, leaving us with an average of €128/ha in 2019.

The rest of the convergence money will go to England, Wales and Northern Ireland, even though:
• Wales already had €247/ha in 2012/13, which is 26% above the minimum of €196, and 90% above Scotland;
• England already had €265/ha, over twice as high as Scotland;
• and Northern Ireland was already at €339/ha, more than two and a half times the average in Scotland.

There have been many examples of UK policy undermining Scottish agriculture.

I thought Hilary Benn’s decision a few years ago not to compensate sheep farmers for foot-and-mouth was a low point, but this is even worse.

It goes against the intentions of the EU.

It defies the wishes of this Parliament.

And it takes away from Scottish farmers and crofters resources which should be theirs, and on which their livelihoods depend.

No surprise then that Scottish farming and crofting leaders are bitterly disappointed by Mr Paterson’s decision.

The UK government tries to defend it by quoting figures not on a per hectare, but a per farm basis. This is spurious for several reasons.

Different countries have different minimum farm sizes for CAP purposes, so it’s not a like-for-like comparison.

And land quality in Scotland is much lower, with our 85% Less Favoured Area status. So farms here are bound to be bigger.

Most importantly, Europe’s entire external convergence process is based on per-hectare figures.

Europe decided that when it comes to convergence, payments per farmer are totally irrelevant.

In fact, it’s ironic and important to point out that during the recent CAP talks Owen Paterson was the first to remind other Member States that payments per farmer was a misleading and irrelevant measure. Indeed, he recently made the same point to our own Rural Affairs Committee!

But now, when it suits him, Owen Paterson uses the opposite argument, to take funds away from Scottish farmers.

Moreover, Paterson argued to cut the CAP budget even deeper than was agreed but now saying Scotland’s cash is needed to mitigate cuts across the UK.

Friday’s announcement contained two additional elements on Pillar 1, presumably intended to sweeten the bitter pill.

The first is a review in 2016-17.

However, the UK has made clear to me that this review would only look at the next EU budget period, starting in 2021 - with no change whatsoever before then.

Another red herring!

In any case, what’s a promise from Westminster worth, when both a UK general election and a referendum on EU membership are due before then?

The other additional element is on voluntary coupled support – a part of the CAP that’s vital for our livestock sector.

Scotland asked the UK to secure the option of using up to 15% of our direct payments budget for coupled support.

Unfortunately the UK accepted an un-level playing field – a deal which let other member states have 13%, but limited us to 8%.

I therefore asked Owen Paterson whether Scotland could apply coupled support above 8% of our budget, provided the UK as a whole remained below 8%

Owen Paterson’s letter to me merely says they’re prepared to think about increasing our 8%.

In any case, this is just damage limitation, given the uneven playing field we’re starting with.

And it gives no extra money to Scotland. Any extra coupled support would have to be funded from within Scotland’s budget.

So this is small comfort for Scottish farmers, in the context of the overall Pillar 1 decision.

I have dwelt on Pillar 1, but Friday’s announcement also covered Pillar 2.

This is important not only to farmers, but to all those interested in the environment and our rural communities.

Here, the European Commission started with high hopes of replacing the current arbitrary allocations, with a system based on objective criteria.

This principle was strongly supported by the UK government. And it should have benefited Scotland, as under the old system we started out with lower Pillar 2 funding per hectare than every member state.

However, vested interests resisted the change. And the final deal was based essentially on historic figures – except that 16 member states insisted on getting special uplifts.

The UK could easily have argued for such an uplift, given Scotland’s position – but it chose not to.

For the within-UK decision, the Scottish Government urged Defra to stick to its principles and use objective criteria.

But Defra has chosen to go with history.

So Scotland will get €477.8m of Pillar 2 funding for 2014-2020. This is 18.5% of the UK total – the same as our share in 2007-13.

The UK government makes much of the fact that, in cash terms, this is a 7.8% increase. But by their own figures, it equates to a 5.5% decrease in real terms.

The overall result of the UK government’s negotiations and decisions, is that Scotland will get the lowest per hectare funding in Europe – lower than every member state – in both Pillars of the new CAP.

In Pillar 1, even the lowest of the other member states will get one and a half times what we get per hectare.

Ireland will get twice our rate, and Belgium three times our rate.

In Pillar 2, the comparisons are even worse.

Even the EU average is more than 6 times our puny rate of €12/ha. And member states like Austria and Slovenia will get 15 to 20 times the amount we get per hectare.

Scotland’s environment and our rural communities, as well as our farmers and crofters, are worse off as a result.

This deeply regrettable position means we have tough decisions ahead.

The first decision is how much money to transfer from Pillar 1 to Pillar 2 – for which Europe’s deadline is the end of this year. I will consult stakeholders on that rapidly.

Pillar 1 payments are vital, and it pains me to consider reducing them.

But with such a pitiful Pillar 2 allocation, there’s little choice if we’re to meet our commitments to LFASS, to climate change, and to rural communities.

We will also shortly launch our consultation documents on the detail of the new Pillars 1 and 2 in Scotland.

Presiding Officer, I deeply regret the appalling budget position we are in due to the UK Government not making Scottish agriculture a priority.

I am meeting farmers’ leaders this afternoon, and I will assure them that the Scottish Government will continue to work with them and our rural communities to make the case for justice and fairness.