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07/10/13 10:34

Scottish Parliament debate on CAP reform

Cabinet Secretary for Rural Affairs Richard Lochhead
Scottish Parliament
October 3rd 2013

This debate, on the Common Agricultural Policy 2014 to 2020, is an opportunity for Government to update Parliament on the state of play in the EU negotiations, and our preparations in here Scotland.

And to explain the next steps.

The debate is well-timed. EU-level agreement on the CAP package was confirmed last week.

Europe still has to finish the formal adoption procedures, which will take till November or December.

But the content of the deal is now decided.

So this is a good time for the Government to update Parliament on that deal, and the implications for Scotland.

But before delving into detail, we should remind ourselves of the wider context.

Nearly every country treats agriculture as a unique sector, needing special treatment.

Europe is no different. For 50 years the CAP has supported European farming - initially to modernise it, and recently to support its role in the environment.

Here in Scotland, CAP funding is absolutely vital.

Last year, receipts from the CAP, at just under £600 million, were almost the same as net income from farming, at just over 600 million.

The survival of our industry depends, in many cases, on a successful CAP.

At the start, one of our priorities was to bring in new entrants and other excluded farmers.

We also wanted to clamp down on slipper farming.

We wanted sufficient coupled support to address the decline in livestock numbers.

We supported greening the CAP. But we needed the details changed, so as not to affect farming operations disproportionately – or result in unintentional consequences for the environment.

We wanted to remove unnecessary red tape from the proposals. And we wanted flexibility to tailor the new CAP to suit Scotland’s needs.

Above all, we needed the UK government to negotiate a decent outcome for us on the budget.

We were very successful on nearly all these priorities.

We achieved changes that will put both past and future new entrants onto a level playing field.

We secured the so-called ‘Scottish Clause’ to clamp down on slipper farmers. But we resisted an ineffective ‘active farmer’ test, that would have tied farmers up in red tape.

We got more flexibility, for example on:
• Making sure properly-farmed heather will be eligible.
• Choosing our own timescale for phasing out historic-based payments.
• And deciding for ourselves whether to cap or reduce big individual payments – so-called ‘degressivity’.

We also achieved improvements on greening. The original proposals could have caused problems for farmers, without commensurate environmental benefit.

Farmers with just 3 hectares of arable land would have had to grow three different crops. We secured a much more realistic version in the final text.

Based on cropping records, roughly 5,000 farmers will now be covered, but the majority are already meeting the rules. Only about 800 will actually have to plant an additional crop.

These are all achievements on Pillar 1. On Pillar 2, there was arguably less to play for, because the proposals were for evolution not revolution.

But we still secured important flexibility in several areas - perhaps most importantly on Areas of Natural Constraint, which will replace LFAs under the new programmes.

So in both Pillar 1 and Pillar 2, our negotiating efforts were mostly successful.

However I was disappointed with the outcome in one area - coupled support.

The original proposals put Scotland at 5% coupled support, on the bottom tier of a two-tier system.

In the final deal, we will have the option of 8% - nearly double our existing coupled support under the Beef Scheme.

But it’s still a two-tier system, which I believe, and I think most farmers believe, is fundamentally unfair. And 8% is well below the 10 to 15% that the Brian Pack inquiry recommended.

This was a key area for Scotland.

Unfortunately our negotiator, Owen Paterson, didn’t want any coupled support whatsoever.

Given where we’ve ended up, I’ve written to Owen Paterson asking whether the 8% limit can apply to the member state, rather than Scotland.

But this is damage limitation. Fundamentally, the deal on coupled support remains a major disappointment for Scotland.

But the deal is now done, and we must turn our attention to how to implement it.

The Government has already been working on this for several years, with stakeholders.

We’ve run working groups.

We carried out extensive modelling, and held a major conference in April.

As a result, there’s an emerging consensus about the way forward – taking into account various concerns.

One such concern is how the move to area-based payments will impact on farmers with high payments under the historic scheme that we currently have.

For example, the more intensive beef farmers, and dairy farmers are concerned about that.

It’s inevitable that their rates per hectare will come down. By definition, below-average rates will rise, and above-average rates will fall.

But there are tools we can use to mitigate the impact, and manage the transition.

In doing that, we must beware of the impact on farmers who’ve been excluded from the Single Farm Payment up til now.

Such as new entrants and deer farmers. They have to be put on a level playing field as quickly as possible, even if we give other farmers more time to adapt.

But we must also look out for loopholes.

Already there are people thinking – I’ve got an empty hillside with some wild deer. Can I call it a deer farm and get CAP payments ?

The answer’s no, incidentally. But the point is that there’s always a minority who’ll try and exploit the system – we need to be aware of that.

Speaking of exploiting the system, under the Scottish clause we must find minimum activity rules that keep slipper farmers out – but let genuine extensive hill farmers in.

We must also look at the impact of greening.

I do believe that greening presents a great opportunity. I want every farmer in this country to be getting greener over time.

Consumers are paying increasing attention to how their food was produced. Scotland has a great reputation for green, natural food, which we can exploit in valuable overseas markets as well as at home.

But that means we must be genuinely green.

Scotland is certainly not the worst in class – for instance, we don’t have the extreme arable monocultures that the 3-crop rule is aimed at.

But our competitors, who want to be seen as green, are catching up with us.

And we do have genuine environmental challenges.

Our index of farmland birds has gone down in each the last 3 years of data.

On water quality, only 60% of bodies of water are in good condition in this country. This is below the long term target of 98%, and hasn’t improved in 4 years.

So there’s a win-win to be had.

We must address our genuine environmental challenges. But in doing so, we can stay ahead of our competitors, and ensure our fantastic natural products succeed in tomorrow’s markets.

How to deliver that win-win, is one of the important decisions ahead of us.

Unfortunately, those decisions will be all the more difficult because of the budget negotiated by the UK government.

In the new CAP, Scotland will probably have lower rates per hectare, in both Pillars, than every member state in Europe.

That is even worse than today.

However, if Scotland had been a member state, we would have automatically got an uplift to €196 per hectare in Pillar 1. As I’ve said before, that would bring in an extra one billion euros up to 2020.

And we could have negotiated an uplift in Pillar 2, like 16 member states did. Finland got a 600 million euro uplift. Portugal, 500 million. Slovenia, 150 million. Lithuania, 100 million, and so on.

But the UK government took the decision not to press Scotland’s case.

If they weren’t willing to get us a decent deal from Europe, the least they can deliver is a fair division of funding within the UK.

We urgently need agreement on this.

Whilst the deadline for most decisions is next year, we have to notify any Pillar to Pillar budget transfers by the end of this year.

I’ve written to Owen Paterson seeking a fair deal for Scotland within the UK’s CAP allocation so we can start taking these decisions.

In particular, the UK received an uplift under the ‘external convergence’ mechanism. By 2020, this will be worth €60 million per year.

That uplift only exists because of Scotland’s low payments under the current system.

At the very least, Owen Paterson must allocate it entirely to Scotland.

This is not a case of taking away money that belongs to farmers in England, Wales or Northern Ireland.

It’s making sure money that belongs to Scottish farmers comes to Scottish farmers, to help them through the challenges ahead.

The first challenge will be getting through 2014.

In theory, the new CAP was supposed to start on 1st January 2014. That was never realistic under Europe’s timetable.

The main regulations won’t even be adopted till November or December –then detailed rules are needed, plus all the work on national implementation.

So 2014 was always destined to be a transition year. I was frustrated that the European Commission was slow to acknowledge this.

However, they have eventually come forward with a draft transitional regulation and we’re now negotiating that.

Despite this uncertainty, I was able recently to set out our plan for 2014.

Europe has made it impossible to avoid a gap between the current SRDP and the new one.

But our transition plan will minimise the impact on the ground, giving continuity where it’s most needed.

For instance, on LFASS, agri-environment contracts, and woodland creation.

At the same time, we are working towards crucial decisions about the new CAP after 2014.

To inform those decisions, we will run consultation exercises on Pillar 1 and Pillar 2, starting towards the end of this year.

It would be wrong for me to pre-empt the results of those consultations.

However, I know farmers are keen to have as much certainty as possible.

So without pre-judging the consultations, I’d like to outline my thinking at this stage.

On the Pillar 1 Basic Payment scheme, there’s emerging consensus around either 2 or 3 regions. That would be simpler than some other options, so I’m minded to go with that.

On coupled support, if we’re stuck with 8% of the Scottish ceiling, then I will give very serious consideration to devoting it all to the beef sector.

I know some sheep farmers will be disappointed to hear that. But their sector already stands to gain considerably from the move to area-based payments.

I’m also keen to explore options for weighting any future beef scheme.

The current scheme give higher rates to the first 10 calves per holding. But the data suggests a decline in the slightly bigger herds. So we must review that aspect.

On greening, we’ll continue to look at the option of ‘equivalence’ schemes which we’re allowed to put in place.

Even the strongest supporters of ‘equivalence’ are getting slightly cold feet, as the details become clearer. And our analysis doesn’t show huge benefits from equivalence schemes for biodiversity. So I am reserving judgement.

But I am very interested in whether equivalence can deliver carbon-reducing measures in this country. So we will continue to work on that.

Similarly on capping and degressivity, there are arguments for and against.

I’m keen to address huge individual payments. But we have to consider what will happen to those payments in any case.

The move to an area-based system should already reduce big payments significantly. We should take account of that when deciding whether or not to apply an absolute cap. And we must look at the so-called ‘redistributive payment’, as another way of tilting Pillar 1 funding towards smaller farms.

We also have decisions to make on Pillar 2.

I’ve said many times that the new SRDP must be simpler for applicants, and better focussed – particularly on key areas like climate change, food and drink, and support for hill farmers and crofters.

But the SRDP is not only for farmers. It also has a much wider role in supporting communities and we need to bear that in mind.

Many people therefore have a stake in the decisions we’ll be taking.

With such crucial decisions ahead, I look forward to Members’ comments on the new CAP.

I hope Parliament will join with me in welcoming our negotiating achievements and calling on the UK government for a fair budget deal so we can work towards a successful new CAP in Scotland.