I am grateful for this opportunity to update Parliament on developments relating to farm payments and rural development funding from 2014 following the United Kingdom Government’s announcement on 8 November on the common agricultural policy budget allocations for the devolved Administrations.
I know that the chamber appreciates that Scottish farming is deeply dependent on European payments to help our farmers compete and remain viable, to support our rural economy and, of course, to put food on our tables and to care for Scotland’s environments. The CAP budgets also support wider rural development and environment schemes the length and breadth of Scotland.
Earlier this year, the European Union set its seven-year budget framework for 2014 to 2020. That included member states’ allocations under the common agricultural policy’s direct farm payments, which are known as pillar 1, and rural development payments, which are known as pillar 2. At the time, the Scottish Government was deeply disappointed with the deal that was negotiated by the United Kingdom, given Scotland’s demands for a fairer share of the EU budgets. However, once we knew the wider CAP budget at the EU and UK levels, all that remained was for the UK to announce the internal UK split of that budget.
For pillar 1, Europe adopted a formula called external convergence. That increased the payments per hectare for all member states in which payments were below a threshold that was set at 90 per cent of the EU average. In addition, Europe said that no member state should end up with an average payment of less than €196 per hectare. Had Scotland been a member state, Scottish farmers and crofters would have received the full benefit of external convergence, which would have been an extra €1 billion—£850 million pounds—over the seven years, because our average payment per hectare is well below the EU threshold. However, while Scotland is part of the UK our low average payment is offset by the average payments in England, Wales and Northern Ireland. As a result of that, the UK as a whole received only €223 million—around £190 million—from external convergence. Nevertheless, despite our historically low share of funding, there was a chink of hope for Scotland. The average payment levels in England, Wales and Northern Ireland are all above the EU’s threshold. It was, therefore, clear that the UK’s uplift was a direct result of the low payments in Scotland. Were it not for Scotland, there would be no uplift for the UK; therefore, in the interests of justice, 100 per cent of the UK’s convergence uplift should come to Scotland.
In a debate here on 1 October, it became clear that other parties shared that view. On 14 October, in an unusual step that illustrated Scotland’s unassailable case, rural affairs spokesmen from Labour, the Conservatives and the Liberal Democrats joined me in writing a letter on the matter to Owen Paterson at the Department for Environment, Food and Rural Affairs. However, in his announcement last Friday, Mr Paterson delivered a slap in the face to Scottish agriculture by deciding that the uplift would not be allocated to Scotland after all. Instead, he divided it among all parts of the UK even though the average payments in England, Wales and Northern Ireland are already above the EU’s threshold.
As a result of that decision, Scotland’s pillar 1 budget—direct payments for farms—will fall from €597 million in the current scheme year to €580 million in 2014 before recovering slightly to €587 million in 2019. That is a drop of 1.6 per cent in cash terms between 2013 and 2019, and it is an even bigger drop in real terms. Scotland will now receive just over 16 per cent of the external convergence funds rather than 100 per cent of them, which will leave us with an average payment of €128 per hectare in 2019. We are starting with an average payment of €130 per hectare, which is the lowest level in Europe, and we will be even further away from the EU threshold by 2019.
The rest of the external convergence money will go to England, Wales and Northern Ireland, even though, in 2012-13, the average payment in Wales was €247 per hectare, which is 26 per cent above the minimum of €196 per hectare and 90 per cent above the average payment in Scotland; the average payment in England was €265 per hectare, which is over twice as much as the average payment in Scotland; and the average payment in Northern Ireland was €339 per hectare, which is more than two and a half times the average payment in Scotland.
During my time in this job, there have been many examples of UK policy undermining Scottish agriculture. I thought that Hilary Benn’s decision a few years ago not to compensate sheep farmers for foot-and-mouth disease was a low point, but this is even worse than that. The decision goes against the intentions of the EU, it defies the wishes of the Scottish Parliament and it takes away from Scottish farmers and crofters resources that should be theirs and on which their livelihoods depend. It is no surprise that Scottish farming and crofting leaders are bitterly disappointed by Mr Paterson’s decision.
The UK Government tries to defend its decision by quoting figures not on a per-hectare basis, but on a per-farm basis. However, that is spurious for several reasons. Different countries have different minimum farm sizes for the purposes of CAP budgets and policy, so there is no like-for-like comparison. The quality of land in Scotland is also much lower, with 85 per cent of our land having less favoured area status, so farms here are bound to be bigger. Most important, Europe’s entire external convergence process is based on a per-hectare formula. Europe decided that, for convergence, payments per farmer are totally irrelevant.
It is ironic that, during the recent agriculture negotiations, Owen Paterson was the first to remind other member states at every opportunity that payments per farmer were a misleading and irrelevant measure. Indeed, in June he made the same point to our Rural Affairs, Climate Change and Environment Committee. However, now, when it suits him, Owen Paterson is using the opposite argument to take funds away from Scottish agriculture. Moreover, Paterson argued to cut the CAP budget even more deeply than was agreed by Europe, but he is now saying that Scotland’s cash is required to help to mitigate cuts elsewhere in the UK. That is rank hypocrisy.
Friday’s announcement contained two additional elements on pillar 1—the direct payments—that are presumably intended to sweeten the bitter pill. The first is that there is to be a review of the formula by 2016-17. However, the UK has made it clear to me that that review will look only at the next EU budget period, which starts in 2021, and that there will be no change whatever before then, so that is another red herring. In any case, what is a promise from Westminster worth when a UK general election and a referendum on EU membership are due to be held before then?
The other additional element is on voluntary coupled support, which is a part of the policy that is vital for our livestock sector. Scotland asked the UK to secure the option of using up to 15 per cent of our direct payments budget for coupled support. Unfortunately, the UK accepted an unlevel playing field—a deal that let other member states use 13 per cent of their direct payments budget for coupled support, but which limited us to a figure of 8 per cent. Therefore, with the support of the industry, I asked Owen Paterson whether Scotland could apply coupled support above 8 per cent of our budget, provided that the UK as a whole remained below 8 per cent. Owen Paterson’s reply to me merely says that the UK Government is prepared to think about increasing our level of 8 per cent. In any case, that is just damage limitation, given the unlevel playing field that we are starting with, and it would give no extra money to Scotland, as any extra coupled support would have to be funded from within Scotland’s existing budgets. That is small comfort to Scotland’s farmers in the context of the overall direct payments decision.
I have spoken about pillar 1 of the CAP, on direct farm payments, but Friday’s announcement also covered pillar 2, which is important not only to farmers, but to all those who are 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 that would be based on objective criteria. That principle, which was strongly supported by the UK Government, should have benefited Scotland, given that under the old system—the existing system—we started out with lower pillar 2 or rural development funding per hectare than every member state.
However, vested interests resisted change and the final deal was based, essentially, on historical figures, except that 16 member states insisted on getting special uplifts. The UK could easily have argued for such an uplift for Scotland, especially given our position of having the lowest payments in the UK and Europe, but it chose not to do so.
In relation to the within-UK decision, the Scottish Government urged DEFRA to stick to its principles and to use objective criteria, but DEFRA has chosen to go with history, so Scotland will get €477.8 million of pillar 2 or rural development funding for 2014-20. That is 18.5 per cent of the UK total, which is the same as our share in 2007-13. The UK Government makes much of the fact that, in cash terms, that is a 7.8 per cent increase but, by the UK Government’s own figures, it equates to a 5.5 per cent 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—our rate will be lower than that of every member state in both pillars of the new CAP. In pillar 1, even the lowest funded of the other member states will get one and a half times what Scotland will get per hectare. Ireland will get twice our rate and Belgium will get three times our rate.
On pillar 2—the rural development funding—the comparisons are even worse. Even the EU average is more than six times our puny rate of €12 per hectare, and member states such as Austria and Slovenia will get 15 to 20 times the amount that we will get per hectare. Our environment and our rural communities will be much worse off. The position that we find ourselves in is deeply regrettable.
As I said at the outset, we will have some tough decisions to take in the times ahead. We are talking about the future of our rural communities, our environment, farming businesses, food businesses, village facilities and other rural facilities. The issue is extremely serious for Scotland. I deeply regret the appalling budget position that we are in as a result of the UK Government not making Scottish agriculture a priority. When I meet farmers’ leaders later this afternoon, 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.
The Presiding Officer:
The cabinet secretary will now take questions on the issues raised in his statement. I intend to allow around 20 minutes for questions, after which we will move on to the next item of business. It would be helpful if members who wish to ask a question were to press their request-to-speak buttons now.
I thank the cabinet secretary for an advance copy of his statement. I share his frustration and disappointment that Scotland is not to receive the uplift in full. We agreed across the political parties that there was a valid argument for Scotland to receive that money because of our current low per hectare share. I believe that the UK Government has made the wrong decision on allocation. CAP reform is necessary and convergence is a key part of that reform. Although in proposing a review the UK Government appears to recognise the importance of that, the distribution of the funds within the UK will do nothing to deliver convergence within the UK and it is a missed opportunity.
However, although I share the cabinet secretary’s disappointment, I do not come to the same conclusions about Scotland’s role within the UK. The Scottish National Party can give no guarantees on what a negotiated entry into the EU would mean for Scottish farmers and the support that they would receive now and in the future. That debate will continue over the next year, but after today the cabinet secretary needs to work with the UK Government to map out how we achieve convergence within the UK. The review, which he has been very dismissive of, is key to that. There is an opportunity to adopt a Scottish approach and to push for key asks around objective criteria, independent scrutiny and reduced timescales. Is he able to agree to that approach?
First, I welcome Claire Baker’s support for the convergence uplift coming to Scotland. Her support was valuable in helping to make Scotland’s case. In response to her comments, though, I should point out that an independent Scotland simply could not do any worse than it has in the negotiations that the UK Government carried out.
I must remind the member that Europe adopted a formula that applies to all member states. It does not apply to some member states but not to other member states; it applies to all member states. Therefore, if Scotland was a member state, the formula would have applied to Scotland and we would have gained €1 billion euros and not faced the cut that we currently face. That is the benefit of being a member state in the common agricultural policy negotiations.
On the UK Government’s agreement to have a review, I have to say that 2017 is quite far away from now. It is post the in-out referendum on Europe—which will be in that year if the UK Government happens to be returned to office—and, of course, it is post the next UK general elections in 2015. Given that I am already dealing with probably my fifth secretary of state from DEFRA over the past five or six years, I think that we will have had even more down the line by 2017. I therefore feel that the commitment to a review is pretty worthless to Scotland and Scottish agriculture. We had the opportunity here and now to deliver the uplift for Scotland, but unfortunately the UK Government has decided to give us a slap in the face, ignore justice and fairness, and deliver a cut instead of a substantial increase.
I, too, am grateful to the cabinet secretary for the advance copy of his statement. I very much share the disappointment of everyone in the chamber that the UK Government was unable to deliver the convergence uplift to Scotland; I would not have signed the cross-party letter to which the cabinet secretary referred had that not been the case. However, I would venture to suggest that if Richard Lochhead had been secretary of state at DEFRA, he would probably have made a very similar decision.
I have to say that I disagree with the cabinet secretary’s opinion of the review that the UK has promised and to which Ms Baker referred. First, in an effort to be positive, I wonder whether the cabinet secretary would agree to work again with other parties in the chamber to explore the possibilities for improving Scotland’s position on area-based CAP funding that I believe the promised review of funding allocation undoubtedly offers. Secondly, whether we like the decision or not, the fact is that the cabinet secretary now knows exactly what resources he has to play with and must now get on and deliver a Scottish CAP, as he has the flexibility to do. In delivering that CAP, will he acknowledge that the 7.8 per cent uplift in pillar 2 support should reduce the need to modulate funding from pillar 1, which is designed and should be used for direct support of Scotland’s farmers?
Again, I thank Alex Fergusson for his support for Scotland’s position. I know that our agricultural sector very much appreciated the cross-party support that it had for its case for 100 per cent of the uplift to come to Scotland.
On pillar 2 budgets, even with the cash increase of the pillar 2 funds, we will still have the lowest level of rural development funding in the UK and the whole of Europe. That is something not to celebrate but to regret.
The member’s first question was about whether I will work to improve the formula for Scotland and our future budget negotiations. Of course I will do that. I always work in the interests of Scottish agriculture. What I have been doing for the past few years, and specifically in the past few months in relation to the budget negotiations, is putting the interests of Scottish agriculture first. It is just a real pity that Alex Fergusson’s counterpart, his colleague in the Conservative Party south of the border, is not doing likewise.
“peripherality is a characteristic that should be supported and protected”, suggesting that he might have been part of the consensus that emerged on the subject. Is it not time that Alistair Carmichael became Scotland’s man in London and not the other way round?
I believe that, when the new Secretary of State for Scotland, Alistair Carmichael, looks back—I was going to say “in a few years”, but perhaps even in a few days—he will be deeply embarrassed by his comments in response to Owen Paterson’s decision last Friday. More important, however, I think that his constituents in Orkney and Shetland will be deeply disappointed and will feel betrayed by the lack of support that they have had from the Secretary of State for Scotland on the issue. However, it is not too late for him to get behind Scotland’s cause in the coming days and weeks over the issue and the fact that he stood by Owen Paterson’s completely indefensible decision.
I congratulate Stewart Stevenson on his detective skills. He is quite right to highlight that comment from June 2013. We have special challenges in this country, and that is why a formula is in place to ensure that the funding is decided on a per hectare basis.
I reiterate that we share the cabinet secretary’s frustration with the UK Government’s decision. We also appreciate that he does not have confidence in Owen Paterson’s review. However, in view of the continuing importance of modelling for the shift from historic to area-based payments, which has not yet been completed, can the cabinet secretary reassure us on the timescale for finalising the work to allow the review to proceed?
Various pieces of work are under way, and our own consultations in Scotland are about to be launched on the rural development programme and the direct payments element of the common agricultural policy.
On the member’s comment about not having confidence in the review, I note that we have another dispute with the UK Government over the fact that our producers’ red meat levies go south of the border and are not used for promoting Scottish red meat produce. After raising the issue with UK Governments for several years, we were promised a few months ago that a review will happen in the future; likewise with the really important issue of the funding formula and convergence of payments between Scotland and the rest of Europe.
Last week, the decision could have been made in Scotland’s favour. It was not made in Scotland’s favour, but we were promised a review a few years down the line. It is a fudge, and that is all that we are getting from the secretary of state, Owen Paterson.
Further to this truly rotten deal for Scotland from the Westminster Government, what specific impact will the real-terms decrease in pillar 2 funding have on the key issue of the environment? I am very worried about that.
As I said in my statement, there are two sources of funding through the common agricultural policy. The first is direct payments for farming and food production, and the second is rural development funding, which is pillar 2—and unfortunately we have a rotten deal there as well. Many of the schemes to support Scotland’s natural environment, such as forestry and agri-environment schemes, are funded through pillar 2, so we are missing a huge opportunity to help many communities, organisations and, most important, Scotland’s environment by having a proper funding stream and a proper deal under pillar 2.
I, too, thank the cabinet secretary for early sight of his statement. Although he rather glossed over the importance of the decision to increase coupled support for Scotland’s livestock farmers, I certainly recognise the disappointment on convergence and the need for a change to the funding model.
Could the cabinet secretary clarify his plans for moving away from the historic production model? I assure him that there will continue to be support across the chamber not only for an early review but for the early introduction of changes following that review, certainly before 2020.
I gave a very cautious welcome to the decision to increase coupled payments from 8 per cent. We understand that the Secretary of State for Scotland has said that that could potentially go to 10 per cent, although we are still waiting for the Secretary of State for Environment, Food and Rural Affairs, Owen Paterson, to confirm that. I do not think that anyone in this chamber seriously views a move from 8 to 10 per cent as a fundamental shift that will help to bring huge benefits to Scottish agriculture. It is perhaps a small step in the right direction, but other countries are getting 13 per cent, which perhaps puts it into perspective.
On plans for moving from an historic to an area basis, which is the big challenge of the new policy in Scotland, we will, as I said, launch in December the consultation on how the options are shaping up. The question is whether the transition is quick or slow, and that is one of the fundamental questions that we are speaking to the industry about.
Given the settlement, the UK Government’s plans for an in/out referendum on Europe and, of course, the Tories’ confirmed intent to all but wipe out direct support for Scotland’s farmers, does the cabinet secretary agree that the only way to provide certainty and a fair deal, and to secure a long-term future for Scottish agriculture, is through independence?
We find ourselves in a strange set of circumstances. If we were independent in Europe, we would have €1 billion—£850 million—more for direct payments for food production in Scotland. As part of the union, we are not getting near enough our fair share of even the UK allocation, never mind Europe’s allocation. If we go outside Europe under a Conservative or Labour Government down south—those parties have policies of removing direct support from Scottish agriculture—there is the potential to have no support for agriculture in Scotland. We would be at the mercy of a Government in London that was outside the common agricultural policy, so the likelihood is that there would be no direct support for Scottish agriculture. That is the serious choice that faces our farmers, crofters and rural communities.
Can the cabinet secretary guarantee that the new Scottish rural development programme will be up and running on time? Can he set out what measures he envisages might be in the new SRDP that will benefit crofters in particular, given concerns that the previous options were impractical and did not cater adequately for small producers, who need the subsidy most of all? Assuming that the Scottish Government can take responsibility for any challenge that comes from Europe in relation to increasing coupled payments to 10 per cent, how does the cabinet secretary envisage that being split between the beef and sheep sectors?
There were a number of questions in there.
On preparation for the new rural development programme, we will launch a consultation in a few weeks’ time. I have already put on record our desire for the programme to be a lot simpler and a lot more focused, and we want to learn the lessons from the existing rural development programme, which at times has been too bureaucratic and has not provided the right support to the right people, albeit that overall it has been very successful. The Scottish Government did not design the existing rural development programme, of course; we inherited it from the previous Administration.
On the use of coupled payments, again I have put it on record that I envisage that there is a case for supporting the beef sector through the use of that mechanism. It is clear that it will all depend on what the final percentage is in respect of our budget for coupled payments and the results of our consultation. There are differences in support for the beef and sheep sectors through coupled payments. Some approaches are more complicated than others in terms of delivery. We must take all those factors into account.
I agree with the comments of crofting leaders, who must be gutted by last week’s decision, given the fragility of many of our crofting communities. The reason why support exists in the first place, of course, is to help our crofters meet the various challenges that they face, from the climatic and geographical challenges to the challenges of the fragile communities in which crofting is often based. That is why the funding is so important. It is about not only the direct payments to farms and agriculture, which many crofts benefit from, but how much money can be made available to the rural development programme, from which the less favoured area payments and other support for crofting flow. The debate is therefore relevant and crucial for our crofters in Scotland.
The cabinet secretary mentioned the Secretary of State for Scotland’s apparent commitment to a willingness to move towards a coupled support level of 10 per cent. We are all disappointed with the current arrangements with the UK Government, and I am sure that farmers from across the south of Scotland will share that disappointment. When will the cabinet secretary begin the necessary work to produce a suitable case for a change to the percentages? What timescale does he think will apply to that work?
In the letter that I received last Friday from Owen Paterson, the Secretary of State for Environment, Food and Rural Affairs, he announced the regrettable decision but said that he is willing to consider giving Scotland some of the UK’s flexibility to use our budget to move from 8 to 10 per cent for coupled payments to support livestock. However, he also appeared to suggest that there might be some legal and other bureaucratic issues around that and that those would have to be ironed out. My officials will speak to UK officials to find out exactly what obstacles the UK envisages and how we can access that potential extra flexibility.
What impact will the UK Government’s decision have on the wider Scottish economy, given that every £1 of output from agriculture is estimated to generate an additional 80p in other parts of the economy? Does the cabinet secretary agree that the only way to guarantee Scottish farmers and crofters a better deal when CAP is next negotiated is for us to have a seat at the top table, which can only be secured with a yes vote in September?
To answer the member’s latter point first, it is obvious to all that I believe that every political party in the Scottish Parliament gives Scottish agriculture a higher priority than any party running the Westminster Government would ever give, which is illustrated by the appalling track record of successive Westminster Governments.
The point about the wider benefit of agricultural support to the rural economy is important. We are not just talking about the direct payments that go to farmers through the first pillar of the policy; we are talking about money that is spent in other businesses in our local communities—we are talking about the whole supply chain in wider rural communities. When they get their single farm payment through the CAP, farmers invest it locally in services and the supply chain, which is of huge benefit to rural employment and the rural economy.
The UK Government’s decision is a blow not just to our farmers but to Scotland’s wider rural economy.
I apologise to the cabinet secretary for missing the beginning of his statement but thank him for early sight of it. I recognise that this is a deeply unfair settlement for Scotland. Can he comment on how much more difficult it will be to meet climate change and biodiversity targets? What steps will the Government take to ensure that we meet those targets?
Alison Johnstone asks a good question. One of the new common agricultural policy’s key objectives is to ensure that agriculture across Scotland and all Europe is greener than it was before. Of course, many of the measures that will have to be adopted will come through not just regulation of direct payments but the rural development funds for agri-environment schemes and other low-carbon schemes that I would like to see included in the new rural development programme for Scotland. The less funding that we have available, the less we can make those special and important projects happen throughout Scotland, and that is to the detriment of Scotland’s biodiversity, natural environment and climate change targets.
Does the cabinet secretary share my view that pillar 2 rural development projects are vital for reducing poverty, promoting ecosystems and enhancing competitiveness? The programme’s participants are farmers and the wider rural community. When will the cabinet secretary make a decision on the level of voluntary modulation from pillar 1 to pillar 2?
The pillar of funding that comes through the common agricultural policy for rural development—pillar 2—is very important and, as David Stewart suggests, we are able to transfer funds between the two pillars: we can take funds out of pillar 1, which is farming support, and put them into pillar 2, which is rural development funding. Many pillar 2 schemes also benefit agricultural and wider rural Scotland.
We must take a decision on the balance of that transfer, or the extent to which we impose a transfer, by the end of this year, and there will be a mini-consultation with the industry before we decide what percentage we should transfer from pillar 1 to pillar 2. As I have just implied, there is likely to be a transfer from pillar 1 to pillar 2 because of our appallingly low pillar 2 allocation for rural development. If we want to deliver the benefits that David Stewart refers to, we have to have a substantial rural development budget.