Commercial Farm Income

– in the Scottish Parliament on 2nd May 2017.

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Photo of Mike Rumbles Mike Rumbles Liberal Democrat

1. To ask the Scottish Government what its response is to figures showing that the average income of commercial farms decreased by 48 per cent in 2015-16. (S5T-00532)

Photo of Fergus Ewing Fergus Ewing Scottish National Party

I agree with Mr Rumbles that, although those reductions were not unexpected, they were still disappointing. As a fundamental part of the rural economy, it is important that agriculture performs well. There is a range of complex reasons behind the decline in farming incomes, primarily the lower revenues that are received for crops and livestock. Finding solutions to those issues is key, which is why we have appointed four industry champions to explore all the issues and take forward our vision for agriculture. They will also have a role to play in the working group that is currently being set up, as per Mr Rumbles’s amendment in the debate on farming earlier this year, which will consider principles and policy for future rural support.

One bright spot in the figures is that costs also fell, which shows that our farmers and crofters are working hard to improve their efficiency. This Government will continue to support them to do that and to help them to diversify income streams.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

These are catastrophic figures and they are compounded by the Scottish Government’s continuing failure to deliver farm payments on time. The average farm business income in the survey was just £12,500, which included support payments of £38,000, with a third of businesses making a loss. Less than half of farm businesses have had this year’s payments processed by the Scottish Government so far. That should all have been done by December. On taking over ministerial responsibility for that shambles almost a year ago, the minister said that getting that right was his number 1 priority. Does he accept responsibility for the continued failure to deliver what is due to our farmers?

Photo of Fergus Ewing Fergus Ewing Scottish National Party

I accept the responsibility that falls on my portfolio. However, as Mr Rumbles knows, or should know, and as I have already explained, the reduction in net farm business income arose primarily because of lower prices. That is simply a fact, but what is also a fact and should be made clear is that the timing of common agricultural policy payments does not impact on net farm business income figures. If Mr Rumbles was seeking to imply that it did, I am afraid that he is incorrect. The payment window for this year’s pillar 1 payments takes us to next month, to June, and I can assure Mr Rumbles and all members that terrific efforts are being made to achieve the targets this year, and a deal of progress is being made.

I regularly report to the Rural Economy and Connectivity Committee to answer questions on these matters, but I share the headline concern of all members about the reduction in incomes. What they show above all else is the essential nature of the European Union financial support payments to farmers and crofters. I hope that that is a point on which we can all agree.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

We cannot have sloping shoulders here. NFU Scotland said on Thursday:

“The viability, let alone profitability, of every Scottish farming business relies on three cogs working together—costs, markets and support” from Government. It concluded that those things

“are conspiring to threaten the very existence of many.”

I would have thought that the cabinet secretary would agree with me that it is a crisis. To date, less than half our farm businesses have had their payments processed. He mentioned the June date, but with only half the payments done, how confident is he that 95 per cent of payments will be made before the end of June, before the European Union takes out infraction proceedings against the Government? Our farmers need that support money and it is not forthcoming.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

Mr Rumbles is well aware that these are extremely serious matters, and I take them as such. However, it is reasonable to point out something that he has omitted, namely that, precisely because of the difficulties in the administration of the payments, loan schemes have been issued to farmers—last year in respect of the less favoured area support scheme, and this year in respect of pillar 1 and LFASS. Those loan payments have been substantially appreciated by a great many farmers whom I speak to.

In response to Mr Rumbles’s second question, I say that we are working extremely hard to ensure that pillar 1 payments are substantially made in accordance with the timescale as set out, and I am quite sure that the Rural Economy and Connectivity Committee, which deals with the detail of the matter, will have the opportunity to ask me about that in the next few weeks.

Photo of Maree Todd Maree Todd Scottish National Party

From his earlier response, it appears to me that the cabinet secretary agrees that the biggest risk to farming incomes, as the research makes plain, is Brexit and the loss of EU funding. Can he advise what guarantees he has had from the Tories at Westminster on future funding for Scottish farming, and has he had any success in persuading it to keep its promise to address the convergence issues?

Photo of Fergus Ewing Fergus Ewing Scottish National Party

The biggest risk to farmers in the future is that the EU support is not matched post-Brexit according to the UK Government’s plans. I regret to report to the member that, despite having asked UK ministers George Eustice and Andrea Leadsom on numerous occasions—orally, in writing and in person—to confirm that the UK Government’s plans post-Brexit are to match EU funding, which is worth £500 million per year to the rural economy, I have had no answer on that matter. That is despite the fact that, by my calculation, there are fewer than 24 months to go before the onset of the post-Brexit responsibilities. We are completely in the dark about that because, although EU funding is entirely a reserved matter, we have received zero information from the UK Government on its plans post-Brexit to support farming and rural payments.

The member’s second point was about convergence funding. Convergence funding to the sum of £190 million was granted by the EU because Scotland—and only Scotland—qualified for it on the basis that the average payment per hectare was the lowest in the UK. Despite that, the funding has not been passed on to Scotland, so we have repeatedly asked the UK Government to pass the money to Scotland as it was intended for Scottish farmers who receive far less per hectare than farmers in England and Wales. I hope that the Conservatives will support that policy when we continue to demand that the money is repaid to Scotland, where it rightly belongs.

Photo of John Scott John Scott Conservative

I declare an interest as a farmer and a food producer.

The First Minister and the cabinet secretary have already apologised to Scottish farmers and crofters for the delay in the 2015 CAP payments, and those apologies are welcome. Notwithstanding his response to Mr Rumbles, can the cabinet secretary tell members how many farmers’ incomes in financial year 2015-16 were affected by the later than expected payments? What impact did that have across Scotland and, particularly, in less favoured areas and crofting communities on farmers’ dramatically reduced income figures, which are under discussion today?

Photo of Fergus Ewing Fergus Ewing Scottish National Party

As I have already made clear, the timing of CAP payments to farmers does not impact on farm business income. I accept that, if payments are made later than expected—for example, later than was delivered in previous years—there is, obviously, a delay in the receipt of payments by farmers. That is a matter of fact and Mr Scott has fairly pointed that out. That is precisely why I, as cabinet secretary, have instructed the latest loan scheme and LFASS payments—we are in the course of arranging those—and why I arranged the loan scheme last year.

Incidentally, that is precisely why a substantial majority of the payments for the loan scheme that was issued last year were made earlier than before, so that farmers and crofters were able to manage their financial affairs. They received the funds in the first fortnight of November, by and large. It is because of that aspect that the Government decided to issue a loan scheme, so that the money would be in the hands of our farmers and crofters and, thereby, in the rural economy of Scotland.

I take all these matters extremely seriously, as Mr Scott realises, I think. I will continue to work day in, day out, as I did today, yesterday, on Sunday and on Saturday and as I do every day. I personally reply to farmers who email me about their complaints to say that they will be dealt with—I hope that that does not trigger several hundred more emails. We are working around the clock to sort out these matters, which we take very seriously.