Agriculture Reform Implementation Oversight Board minutes: 27 September 2024

Attendees and apologies

• Cabinet Secretary for Rural Affairs, Land Reform and Islands, Mairi Gougeon ( Co-Chair)
• Martin Kennedy (Co-Chair)

Items and actions

Welcome and previous minutes: agenda item 1

Chair welcomed her co-chair and members to the tenth in-person meeting of the board, noted apologies and opened the floor to any comments ahead of the first substantive item.

Comments from members

• the circulation of the recent SRUC Three Islands report was welcomed and an action (1) was taken to add it to the workplan for specific discussion
• one member asked about progress on the Small Producers Pilot Fund, specifically with regard to timescales
• officials committed to providing further detail but work is ongoing for the remainder of the financial year, working with partners on development
• a similar request on timescales was made with regard to Rural Support Plan (RSP) publication, noting the tight timetable to do so
• officials provided the Rural Affairs and Islands committee with an early draft before Stage 3 of the Agriculture and Rural Communities Bill. The RSP is a culmination of work through the Agricultural Reform Programme (ARP) with valued input from stakeholders and remains ongoing

Enhanced Greening: agenda item 2

Ahead of the first presentation by officials, Chair made opening remarks to set context. Chair noted that, in the immediate term, our ambition will be curtailed, still dealing with legacy CAP systems which were not designed to be radically altered as is our desire. In addition, a lack of certainty on budgets is unavoidably inhibiting decisions we can make right now in terms of future investment. While the Scottish Government (SG) has to use these systems in the immediate term, we will strive to make them work for the Programme as we build towards the greater overall ambition as set out in the Vision.

As part of the framework, Tier 2 is to be a universally acceptable payment that supplements Tier 1 by delivering outcomes for nature and climate improvement. This discovery project was to examine farmers undertaking further activity on outcomes for nature and climate while working within constraints. This doesn’t signal a lack of ambition, but may need a more targeted focus on some elements first so that delivery is workable for each and every farm type. Budgetary constraints presently curtail the full ambition of Enhanced but, as a transitional step, the use of Greening will allow pragmatic progress towards SG policy outcomes as outlined in the Vision for Agriculture.

Following on from the last meeting of the board on 31 May, officials provided a short history of Enhanced as well as an update on the project where the existing Greening Mechanism will be used to deliver Enhanced for 2026. 

The goal was to specify and collate evidence of the impact of the five opportunities that an expanded Greening presents:

• change guidance to bring arable Ecological Focus Areas (EFA) activity up to date and encourage industry best practice on permanent grassland for example rotational or mob grazing, wildlife friendly mowing
• increase the number of businesses required to meet EFA requirements by reducing or removing exemptions
• increase the percentage of BPS budget allocated to Greening
• increase the amount of land managed as EFA from 5%
• add new EFA options linked to published measures

Officials thanked members for their engagement on this work ahead of final proposal to the Cabinet Secretary for consideration and continue to welcome feedback. The next phase will be carried out on the basis of Cabinet Secretary’s decision and next spring (2025) comms will inform people on the practical requirements for 2026.

Comments from members

• in light of the position, members were keen to establish timescales – is this a discussion on the next 2-3 years or longer-term? Officials replied that there remain a huge number of unknowns, particularly without budget clarity
• the immediate aim is to progress Enhanced Greening to a point where it is a deliverable, baseline mechanism for at least 3 years but with flexibility built-in should budgets increase
• chair added that a multi-year ring-fenced budget would be transformational to Enhanced outcomes
• the possibility that some farmers and crofters may not be aware rough grazing is classed as permanent grassland for the purposes of Greening
• officials agreed on clarity but that bespoke requirements are beyond the current scope of current constraints
• there will be no change to any definitions for the purposes of Enhanced Greening
• some believed this was underwhelming and acknowledged that while it was being done to maximise outcomes from the current system, it would have major implications for climate and nature as well as an overall reduction of GHG emissions
• tiers 2 was originally envisaged as doing the “heavy lifting” for climate and nature and we’re at the stage of adopting a nature-based scheme so what are we doing about climate?
• there is a clear nature crisis which remains on a downward trajectory and this work is effectively tinkering when a much bigger impact is required
• others felt this would be an evolution as, until the measures list is expanded, it will have a biodiversity focus
• on biodiversity estimates as a result of these measures, quantitative assessments of improvement very difficult but an increase in EFA undertakings will have a positive impact
• similarly, it was argued, choosing combinations of options under EFA and additional collective weighting should be encouraged for greater overall benefit and the AAP report makes clear that species-rich pastures have better potential outcomes
• opportunities to go to the research community to assess best nature outcomes and how we know if we are maximising value for nature
• there needs to be an awareness of the capital outlay which will be required by many farmers and crofters to comply, not only tools such as pollinators, but the availability of good seed in addition to the confidence required to make such investment
• ultimately, how does this get Scotland to Net Zero in the agricultural envelope? How much is it going to deliver against? What contribution does each option provide? 
• this is the foundational point for the whole Programme
• officials cited the monitoring and evaluation framework which breaks down proposed outcomes and sub-outcomes
• the SG has work measuring this consolidation phase against delivering against overall targets and how steps like Enhanced Greening will contribute - that is being built over time and for each project
• members agreed it would be helpful to see such M and E considered as part of respective presentations
• there was some discussion on ineligible features in terms of farms delivering in their totality in a way that hasn’t previously been recorded
• this isn’t entirely compatible with the universal aims of Tier 2 when most land in Scotland is not covered by the scheme whereas some kind of high nature value initiative would provide a more equitable step forward
• perhaps a working group could be formed to consider and an action (2) was taken. the point was made again that HNV inputs would be incompatible under current constraints but it might be appropriate to look at permanent pasture within existing mechanisms which doesn’t hold up implementation
• if serious about restoring biodiversity we need to go beyond what’s proposed
• let’s highlight multiple outcomes – hedgerows are great for biodiversity but store carbon too, reducing flood risk
• this needs the right advice and support across ecosystem services
• on seed drilling, a minimum 3m depth has been decided on as a compromise but that weightings might be revised in the future based on a review after Enhanced Greening has bedded in
• there was some discussion on monitoring unintended consequences and the minimum percentage of EFA with varying opinions on the minimum percentage
• in response to consultation on options details, and as a direction from Chair, officials took an action (3) to share the EFA Greening detail with the board
• this has since been issued to members with a deadline for feedback of 11 October 

Budgets: agenda item 3

Officials provided some background, notably the SG’s commitment that at least 70% of the future budget will be deployed, at the outset of the transition, through Tiers 1 and 2, making use of existing delivery schemes as proxies at the outset.

As was covered earlier, Tier 2 cannot deliver the full policy intent as originally proposed. The sum allocated to BPS and Greening amounts to approximately 69% of the total Financial Year 2024-25 budget, split on a ratio of close to 2:1 in favour of BPS over Greening. Within acknowledged budget uncertainty and anticipated constraints, progressing with the proposed ratio of 1:1 for Base and Enhanced might imply a lack of urgency towards reward for and incentivisation to sustainable and regenerative practices. However, we must be mindful of ensuring sectoral resilience as we need viable farms and crofts to deliver. The feedback received from members with inform advice to Minister and the required Business and Regulatory Impact Assessment.

Comments from members

• as the budget split will likely affect the viability of farming businesses, modelling needs to be carried out
• Region 3 has been historically underfunded and there was concern at the introduction of Tier 2 prior to regionalisation revision
• a suggestion was made to introduce an interim solution to ensure equity across everyone involved in environmental management
• chair agreed that this was an important point and referenced the review of regions item later in the day
• officials added that there is a commitment for a LFA successor to sit within Tier 2 and farms in areas of constraint (with additional costs associated) will be factored into advice
• on the small producers pilot scheme, previous discussions focussed on unsupported businesses and capital measures
• this also needs to be considered here to support smaller businesses going forward, particularly crofting.
• a warning was also given on thresholds, with those just above them likely to be under huge financial pressure and the Minister agreed that those on the edges of where the lines are drawn need to be considered
• a large proportion of the industry isn’t eligible for a lot of funding. What are we doing for them and what are we doing about carbon reduction in T2?
• there was a view offered that the Government’s hands have been tied with the 70% allocation to Tiers 1 and 2. It should be 50/50 as a starting point
• replacing LFASS will provide better benefits in the longer term but we are several years into this process already, move money to where it needs to go to better reach our objectives
• finally, in response to a question on decision making, this will be addressed within SSIs in Autumn 2025 but a Ministerial decision will be made well in advance of then
• officials welcomed any further feedback to the Secretariat in writing and Chair agreed to circulation of a collation of comments and an action (4) was taken

Review of Regions: agenda item 4

Against the backdrop of Tier 2 moving quicker to get off the ground, there has been a body of evidence gathered around the current region model against delivering future payments. This has included a desk-based review, technical review and RESAS review. 

Regionalisation has effectively been a budget management tool but to deliver in future, the SG needs a better understanding of how it can be improved. Farmers and crofters need to be aware of eligibility and activity, with the job of the SG to make the tiered approach come to life so it can be easily explained. Farmers and crofters are largely aware of the overarching plans but need to visualise it in the context of their own holdings.

The SRUC have carried out analysis to support SG policy deliberations on base payments post-2026 to: define and communicate the state of play for regions – shape of the system as it stands; Test regionalisation options; Place Tier 1 in the context of other schemes (e.g. Less Favoured Areas, & VCS).

In terms of baselining, 87% of funding has gone to region 1 land which makes up 43% of land on which BPS is paid in Scotland. Is it feasible to deliver future outcomes on this basis? Combined regions analysis has been the starting point for this work and a Scenario Generation Tool has been developed which displays the impact of decisions in relation to combining the regions. An action (5) was taken to provide ARIOB members with a greater overview of the system.

Comments from members

• changes to the model need to be based on the outcomes we want and ensuring the money is allocated accordingly
• however, if this is being delivered through the base model and the budget split is as appears, it won’t allow for significant change
• the scheme we have is not focussed on outcomes
• for the last 20 years it has not had an intervention logic
• we need to move into paying farmers and crofters for what they do (e.g. reduction in nitrogen and pesticide use, methane inhibitors) not what they have
• the alternative view was put across that supporting rural communities in the way that the Government has is a justified interventionist in itself – we do not want to lose farmers and crofters through the transition
• budget allocations need to be region dependant for different outcomes across different land covers
• officials responded that the activity element still requires assessment
• capping and frontloading can be important measures by way of support for rural community purposes and other social variables
• merging of region 2 and 3 would go some way to helping complex delivery of Tier 2 measures in a rough grazing context. That work should move forward;
• the Minister reminded the board that the Government’s job is to get this through Parliamentary process and will be working at pace to provide a robust evidence base in order to do so

Common grazings: agenda item 5

Officials provided a short overview of the common grazings profile across Scotland, noting that they continue to engage in future support framework development so that the complexities of crofting are fully considered. The crofting team recently hosted 15 stakeholder engagement events across the crofting counties. The feedback received reiterated the decline in usage of common grazings. To tackle this, the SG wants to remove barriers for those active crofters and groups who want to use the common grazing, whether that is for livestock grazing, woodland creation, habitat restoration, biodiversity enhancement etc. – in other words, unlocking potential revenue streams and so there is a clear preference for activity over inactivity.

Comments from members

• members welcomed discussion of the topic and that any next steps must start by baselining how current support is being accessed by crofters and how that relates to common grazings, especially as most of that is claimed on an individual basis
• this is important because land management under Tier 2 is critical to its success, particularly when 500,000ha of crofting land can really help deliver outcomes
• grazings committees being in office is vital to the long-term sustainability of the practice
• transaction costs are prohibitive but further analysis should be carried out with regard to vacant crofts and barriers to entry
• the SRUC Three Islands report doesn’t give all the answers but the chapter on common grazings goes some way towards identifying problems and potential solutions
• promoting collaborative working might go a long way, especially with collective funding
• the benefits of frontloading were mentioned again, predominantly that it helps crofters in fragile areas to avoid abandonment
• peatland restoration is incredibly important and that money could go to crofters
• cuts have been made to the nature restoration budget so, it was argued, that the agri budget needs to carry more of the burden in this respect
• in response to the request to create a specific board, Chair took an action (6) for officials to consider how to best take this forward

Land reform and tenancy: agenda item 6

For the final item, officials provided a summary of the state of affairs in regard to the passage of the Land Reform Bill and the provisions therein. The Bill is currently being considered by the relevant Parliamentary committee with stage 1 scrutiny likely in the new year. The three proposals, which were subject to consultation, will place a legal obligation on owners of landholdings over 3000 hectares to engage with local communities about how they use their land, including a requirement to produce land management plans to set out how they use their land and how that contributes to key public policy priorities, like addressing climate change and protecting and restoring nature. It will ensure ‘pre-notification’ of sales from landholdings over 1000 hectares to improve opportunities for community right to buy. Finally, it will introduce a ‘transfer test’ on sales of over 1000 ha, allowing Ministers to consider impacts on local communities. This could lead to the requirement to sell land in lots rather than to one buyer, if that may help local communities.

Moving on to Part 2, it includes Land Management Tenancy provisions which will facilitate a new approach to land management and will support a range of land management activities that help to deliver net zero, biodiversity and sustainable and regenerative agricultural ambitions. In addition, there are Agricultural holding and small landholding provisions which includes measures to reform tenant farming and small landholding legislation, to make it fit for the future.

Comments from members

• in response to a question on legal obligations of land management plans, officials cited some of the requirements including land use, how the land is delivering for climate and nature and an update to communities for the coming five years
• more work is to be done on how plans are set out and published but will be widely available
• co-chair asked about potential conflicts with tenants but officials made clear that the obligation is on the landowner and not the tenant
• the Whole Farm Plan (WFP) forms part of the land management plan to ensure it is less onerous
• some were supportive of a proposal for new land management tenancies and not doing so might be a missed opportunity
• in terms of mapping requirements, in a crofting sense, it was confirmed that is it the overall landholding that requires mapping rather than individual crofts or tenancies within that landholding – i.e. the whole boundary
• agricultural tenancies are individual leases with differing conditions
• as they are private contractual agreements which is why the Government is not being prescriptive in terms of sustainable and regenerative agriculture
• if you are a community group and your main activity is not agricultural then you can use the new lease
• there is demand from community groups, individuals and new entrants and this is a way to utilise land that currently isn’t being in a way that provides climate and nature gains while offering food production
• on the discussion around carbon, it requires further consideration as it requires a UK-wide approach and the market is in its infancy
• co-chair mentioned that the biggest challenge for new entrants is land access opportunities and landowners must have confidence to let land – no piece of legislation should damage the relationship
• officials noted overarching legislation that allows a certain percentage of land to be managed in a different way (e.g. tree planting) without compromising the historic form of the estate. There is clearly a balance to be struck between landlord and tenant, moving from prescriptive lists to a more principles-based approach
• TFAF members on tenancy paper, looking at challenges
• did consider consolidation but would take eight years. Doing as much as we can in the time available for the future framework
• chair added that the RAI Committee has heard a lot of the concerns and officials will continue to work through these

Chair thanked members for their contributions and looked forward to the board’s next meeting on 15 November 2024.