Hansard

The common agricultural policy proposals that are to be set in place by January 2014 must be made to be good for Scotland’s highly successful food and drink industry and our outstanding environment. My committee is determined to consider which aspects would need to be fine-tuned to suit conditions in Scotland, where less favoured areas—now to be called areas of natural constraint—make up 85 per cent of farming and crofting land.

In relation to an all-European Union policy, stakeholders have rightly raised concerns that the policy stance of the Department for Environment, Food and Rural Affairs ministers in London who sit at the negotiating table is somewhat different. The Secretary of State for Environment, Food and Rural Affairs, Caroline Spelman, and her deputy, Jim Paice, have proposed drastic cuts in direct subsidies. That does not meet the needs of Scottish agricultural conditions, as our evidence will show.

Notwithstanding the size of the industry, food production is essential to everyone’s life. Although it is a small part of the overall economy, food and drink is one of the real Scottish economic success stories, and the Scottish National Party Government has set ambitious growth targets that aim to build the value of the industry from £10 billion per annum to £12.5 billion by 2017. Last year, food exports from Scotland broke through the £1 billion barrier.

With regard to the proposed future CAP support system, the maintenance of the broad two-pillar structure of the CAP and the budget has been welcomed by farming interests and the Scottish Government, and fits with what was proposed in the Pack review.

In relation to pillar 1, Scotland currently has a ceiling for single farm payments of €647 million, of which €82 million is deducted through modulation and used to fund the Scotland rural development programme. In relation to pillar 2, the Scotland rural development programme is funded through that pot. Between 2007 and 2013, Scotland has a maximum of €680 million of European funding.

The committee has, in its scrutiny of the subject, taken evidence so far from Scottish MEPs and, in round-table format, from stakeholders. It is still to take evidence from the United Kingdom and Scottish Governments before it writes up its conclusions and recommendations. Jim Paice, the minister of state at DEFRA, will give evidence to the committee on 7 March, followed by Richard Lochhead on 14 March. The committee will then agree its interim report.

The CAP review process will continue through 2012. Draft reports from the European Commission are expected around April 2012, and the committee may consider taking evidence from Scottish MEPs at an appropriate point in the year, and from the secretary of state, Caroline Spelman, whom I finally managed to meet briefly last Thursday on her courtesy visit to the Parliament.

The following themes have emerged in evidence. The overall EU budget and the current state of the euro zone will have a significant impact on the CAP reforms. Will the CAP budget be slashed? Could that delay the reforms that are due to come into place on 1 January 2014, and could it impact in particular on rural development support?

NFU Scotland said that there must be a planned bridging mechanism to avoid the 12 to 18-month gap in agri-environment support that occurred last time. Scottish Environment LINK agreed that bridging was needed, as it looks as if 2015 is a more realistic start date for the new CAP.

MEPs warned of the possibility of a shrinking budget and diminishing pillar 1 funds in particular. Our committee has to ask if Scotland is prepared in the longer term for those funds to diminish. MEPs raised the issues of food security and the need to achieve the right balance between food production and sustainability and environment measures.

On that subject, Alyn Smith MEP commented in The Press and Journal on 13 January that he believed that

“the UK government was naïve in its thinking that higher ex-farm prices could justify the phasing out or elimination of direct subsidies. They ignore the equally high increases in input costs which wipe out a farmer’s margins, or the de facto difficulties of farmers to actually secure these higher prices due to supply chain pressures.”

In relation to pillar 1 and pillar 2, Scotland obviously wants to ensure that the UK gets a fair share of funds and that Scotland gets an appropriate share of those UK funds—a share that takes account of the particular challenges that are faced in Scotland. Pressure will come from the calls of new member states in eastern Europe.

On the proposed changes to the administration of pillar 1 funds, the new basic payment scheme—direct payments based on area—is supported as a better alternative to the previous, historically based payments. However, many felt that, although a flat rate would be administratively simple, it would not work in Scotland without significant tailoring to the Scottish environment. Stakeholders were concerned about how the trigger for eligibility for area payments would work. The NFUS and the Scottish Tenant Farmers Association were happy that it would be linked to holdings in 2011 but felt that a stronger link was required between the amount of land that someone had in 2011 and the amount of entitlements that they could claim in 2014.