Hansard

Our countryside is special, as are the farmers and crofters who care for it and work the land to produce a range of public benefits. In the past few months alone, I have spoken to hill farmers on Mull and in Speyside, crofters on Lewis, and farmers in Fife and the Borders, to give just a few examples. Those people are the lifeblood of our nation. The Government's purpose of sustainable economic growth is vital to our rural areas, especially in these difficult economic times. Today, I am announcing the Government's position on three interrelated agriculture policy issues.

First, the less favoured area support scheme aims to deliver economic, social and environmental benefits that depend on active land management in the hills. LFASS expires in December, so we have to decide on successor arrangements.

Secondly, we now have the report on the independent review of the Scotland rural development programme by Peter Cook. The SRDP delivers support for a range of activities, from capital investment for businesses to environmental and community projects. Today, the Government is publishing Peter Cook's report and our position on his recommendations. I thank him for doing a tremendous job in a short timescale.

Finally, there is the recent common agricultural policy health check. Some parts of the health check are closely linked to LFASS and the SRDP, and we agreed with stakeholders that we would consider those issues at the same time.

The Government's vision for agriculture is based on optimising the use of Scotland's natural assets to produce food, other goods and services, and public benefits for which it is right that society should pay. Those assets include not just the land, but our world-renowned landscape, our rich biodiversity and our wealth in soil carbon and renewable energy sources. Therefore, the principles on which the package is based are optimisation of use of natural resources in Scotland; provision of public support for public goods, particularly social and environmental public goods; use of public money as effectively as possible to deliver the desired outcomes for our nation, while relying on farmers and crofters to produce for the market; and preparation of Scotland for the longer term. Most observers agree that, in all likelihood, the common agricultural policy will, after 2013, look very different from today's CAP.

The first part of the package concerns the future of livestock farming on the hills. Many people have highlighted the serious situation that is faced by beef and sheep farming on our hills. Livestock numbers are falling, and land abandonment is a reality in some areas. There is, of course, a complex set of issues. For instance, Peter Cook has said that hill farming matters more for community and environmental reasons than it does for food production, and that the fall in lamb production in the north and west since 2004 could be replaced by an increase of only 3 per cent in production elsewhere in Scotland. Moreover, farmers have told me that a reduction in flock size is not necessarily always a bad thing if performance improves.

However, it is recognised throughout Parliament that hill farming faces unique challenges. A Mull farmer told me how he expresses his stocking rate not in sheep per hectare, but in hectares per sheep. The costs of transport to and from islands and remote communities cannot be ignored. We need to strike a balance in addressing that difficult issue: we need to help businesses through the short term and offer investment support for the longer term. Both elements are vital to our getting farm businesses on to a solid footing for the future.

As we are all aware, there has been lively debate among stakeholders on support for the hills and how it should be funded. In our consultation on the health check, we received 50 responses and dozens of different suggestions. Perhaps the only consensus among stakeholders is that there is no easy answer to the difficult challenge that exists.

In taking our decision, the Government has paid attention to two key factors: our ability to target the different measures and the speed with which they can make a difference. Some people suggested new support for the hills through the land managers options part of the SRDP, but because of European rules, new LMOs cannot benefit farmers' bank accounts until mid-2011 at the earliest. The Government and, I am sure, Parliament wish to see action sooner. Therefore, we have decided on a staged approach, subject to approval from Europe.

First, we will make an immediate increase in LFASS payments for 2009 for the fragile and very fragile land categories. That increase of 19 per cent will mean, for example, an extra £1,300 for the average sheep producer in the Highlands, or an extra £1,600 for a beef producer in Orkney.

From next year onwards, the current LFASS will be replaced by a revised version—LFASS 2010. There will be three main changes. The first will be a further increase in payment rates in the fragile and very fragile areas, giving a total of a 38 per cent increase compared with 2008. The main beneficiaries will be sheep producers in the most vulnerable areas. We will also strengthen the link between payment levels and hill farming activity by updating the statistics on which payments are based. Finally, there will be reinforced rules to determine active farming, so that payments are focused on those who are genuinely active. We will consult stakeholders on precisely how to do that; it could, for example, include rules on stocking density and lambing rates.

Together, those steps should deliver £15 million of extra support over the next two years to active farmers in the fragile and very fragile regions. We will fund that partly from unspent money in LFASS, which has been caused by the decline in applications, and partly by linking payments to active farming. The remainder will be funded from increased European funding, which has been brought about by the weaker pound. We intend to deliver the extra support without reducing the budget elsewhere in the SRDP. To be clear: from now on, payments will be linked more closely to active farming. All those who are involved, including members, have told me that that is the right thing to do.

In addition, we will maintain the £20 million Scottish beef calf scheme, which is funded through the current top-slicing of single farm payments. However, after much consideration, I have for several reasons decided against any further top-slicing of SFPs under article 68. First, support can be delivered more quickly in the way that I have described. Furthermore, European Union rules limit how we can spend article 68 money, which makes it a bit more difficult to target. Ultimately, the most we can do via article 68 is redistribute 10 per cent of the single farm payment. However, the single farm payment needs to be reconsidered. That is an issue to which I will return.

The first steps that I have described will deliver short-term assistance to hill farming faster than any other tool, but I am also announcing two further stages. First, we will review the role of the land managers options in the SRDP. LMOs provide easy-to-access support for small-scale activities, such as small environmental schemes and minor investments. Peter Cook says that although the overall balance of the SRDP is right, there is, nonetheless, a gap—the absence of an entry-level agri-environment measure through which farmers who have not previously participated in environmental schemes can test the water. The Government accepts that recommendation, so we will, with stakeholders, consider the agri-environment measures in the SRDP—specifically, the role that LMOs can play in supporting grazing in the hills.

I am also open to the possibility of there being differential limits for LMOs on hill farms. European Union rules give the European Commission up to six months to approve any changes. We will therefore submit changes to the Commission in time for implementation in 2011. Following the abolition of set aside, we will also examine the role of LMOs in preserving any environmental benefits that might be lost as a result of that change.

Those short and medium-term changes will deliver substantial extra support for our most vulnerable producers, and supplement the many other ways in which Government supports the sector. For instance, for the sheep sector alone, we fund monitor farms and we support Quality Meat Scotland and its sheep strategy. We have also funded bluetongue vaccinations and a £3 million pilot project on electronic identification for sheep. Furthermore, we are working hard to resist the current sheep EID proposals.

However, there is a longer-term issue, which forms the final part of the livestock package. Farmers in Scotland receive more than £430 million each year through the single farm payment. The payments are based on support that was received in a reference period, which means that any link between the size of the payment and the farmer's economic need or the public benefits that he delivers is at best accidental and at worst non-existent. A quick analysis illustrates the case for change. At parish level, the highest payments in Scotland average £650 per hectare, and the lowest payment is £3 per hectare. At individual field level, the highest payment in Scotland is £3,950 per hectare, whereas the lowest is 6p—not £6, but 6p—per hectare. That situation is clearly unsustainable. Stakeholders agree and EU Commissioner Mariann Fischer Boel signalled only last week that she thinks the same. Until the health check, we had no choice but to keep our current system until 2013. The health check has provided the chance to revisit our system and to make changes voluntarily, if we wish, before they are forced on us later. We must seize the opportunity, and give serious scrutiny to how we use public money to support farming in Scotland, including distribution among sectors and regions.

I have therefore asked a leading figure in Scotland's rural sector to chair an immediate inquiry reviewing farm support in Scotland. That review will examine how the public money that we spend—more than £0.5 billion a year—contributes to the national outcomes that we have set for Scotland, and how it supports the Scottish Government's vision for a new contract between society and our farmers and crofters to support natural resource productivity with maximum impact and minimum bureaucracy. The inquiry will look especially at the single farm payment and make recommendations on whether we should use the option to revise our system. It will report by next spring, with an interim report in December. I am delighted to announce that Brian Pack, who is the former chief executive of ANM Group Ltd and is present in the gallery today, has agreed to carry out that vital task on behalf of the people of Scotland and this vital industry.

I have said many times that there is no magic bullet for solving the problems of hill farming in Scotland. There are complex issues involved. In helping a sector that is in genuine need, we must beware of inadvertently damaging other parts of the industry. Farming has its own side of the bargain to keep—it is not the Government's job to tell farmers how many sheep and cattle to keep or how to produce for the market. Against that difficult background, the package that I have described combines the quickest short-term benefit for hill farms with the most effective approach to support in the longer term. We will discuss these issues urgently with stakeholders.

Aside from the issue of hill farming, Peter Cook concluded that the overall balance of the SRDP is correct, but he made recommendations to refocus the programme in order to make it more effective. I can therefore announce further changes. First, to help attract new blood into the industry, we will introduce extra support for new entrants. We were the first Administration to introduce new-entrant support but—as Peter Cook acknowledges—European rules and the economic climate have limited that support's impact, which we accept. We will therefore use new flexibility to introduce an establishment grant of up to 75 per cent of the existing support for interest payments, bringing the maximum support for any new entrant up to €70,000.

We will increase support for slurry-handling projects from 40 per cent to 50 per cent or more for young farmers. That support will be of benefit to the pig and dairy sectors, and to farmers in nitrate-vulnerable zones in particular, and will be worth £5,000 on a £50,000 slurry-handling project.

Subject to the necessary approvals, we will increase the limit on renewable energy diversification projects from €200,000 to €500,000. Along with higher support rates for forestry, which we have already submitted for approval, that will help towards meeting our ambitious climate change targets.

Of course, the SRDP is not just for land managers but for all our rural communities. We will increase support for community projects from 50 per cent grant aid to 90 per cent grant aid, so that more communities throughout Scotland will benefit.

Many of the changes are subject to approval from Europe, but they show that the Government is listening to stakeholders and to Peter Cook. They will help the SRDP to meet the needs of rural Scotland even more effectively in the future.

As well as refocusing the content of the SRDP, we have taken a serious look at how it operates. Understandably, Peter Cook's review has concentrated on the rural priorities scheme. He acknowledges that uptake of rural priorities money has been very high in its first year, compared with previous schemes. In the four rounds, we have approved nearly £125 million for 1,800 projects throughout rural Scotland. In the same timescale, the previous rural stewardship scheme approved only £18 million for fewer than 500 cases. As Peter Cook says:

"… the potential level of funding for individual projects greatly exceeds anything under previous schemes."

This week, David Green of Cairngorm national park said in the press that the SRDP

"has made a real difference to the national park including the viability of those businesses".

However, there have been problems. Because of delays in Europe, implementation of this complex and ambitious programme was rushed. Some things should have been done differently and mistakes were made, which I acknowledge, but the crucial question is about how we move forward.

Many of the people who were interviewed by Peter Cook see the benefits of the computerised approach and are impressed by the breadth and range of available options. We agree with him that the existing system should be improved rather than replaced. We will reduce bureaucracy and streamline the system by making the first stage of the two-stage process optional. The first stage—the so-called statement of intent—was introduced because stakeholders asked for early feedback on their application, but the strong message now is that that should be optional, which we accept.

We will make it easier for smaller applications—under £10,000—by ensuring that applicants need only provide essential data, rather than the detailed outcome plan that is currently asked for.

As recommended by the earlier McRobbie report on the forestry sector, we will approve non-contentious forestry projects on an on-going basis. There will also be better support for applicants for whom the approval process's being online is a problem. We will provide access to broadband through our regional offices and, where possible, more locally. Help will be available in completing applications not just through better introductory guidance, but through the support of a member of the Scottish Government's staff or its partners. The customer service desk will be strengthened and other measures will be taken. Support through LEADER will be made available for businesses to establish a broadband connection. On the scale of grants, we will ensure that any grants of more than £250,000 are approved only if they meet the strictest criteria and our national outcomes.

The uptake of rural priorities shows that a massive amount has been achieved in a short time, to rural Scotland's benefit. However, improvements are needed, and the changes that I have announced will deliver them.

The Government has announced today a substantial package that will shape farm support in the years ahead in order to deliver food production and food security, a healthy environment, landscape and biodiversity, and flourishing rural communities throughout our nation. I commend my statement to Parliament.