Agriculture Reform Implementation Oversight Board minutes: 28 July 2022

Attendees and apologies

Co-chairs

• Mairi Gougeon Cabinet Secretary Rural Affairs and Islands
• Martin Kennedy

Items and actions

Welcome, housekeeping and introductions

Cabinet Secretary for Rural Affairs and Islands welcomed everyone to the second face-to-face meeting of the ARIOB, thanking them for giving up their valuable time to support the Scottish Government’s development of future rural policy.

Chair informed members that, sadly, due to understandable work pressures, Joyce Campbell (JC) has resigned from the ARIOB. Chair noted the significant amount of time and energy JC contributed to assisting the Scottish Government in driving through proposals for the future of rural Scotland, and asked that the minutes record thanks for her efforts and the Board’s well-wishes for the future.

Co-chair reiterated the welcome to members, reinforcing the urgency of the task at hand.

Land Reform Bill - consultation update*

Officials provided an update to the Board on the Land Reform Bill and the related consultation which closes for responses on Sunday 25 September.

Officials cited the three specific proposals in relation to large-scale landholdings, namely:

• an obligation to comply with a compulsory (rather than the current advisory) Land Rights and Responsibilities Statement, and associated protocols
• compulsory land management plans which set out how the land would be managed for, say, five years. It could include things like engaging with local communities, improving biodiversity etc
• measures to regulate the market in large-scale land transfers, also known as the Public Interest Test (which was recommended by the Scottish Land Commission)

The consultation proposes three different criteria to define “large scale landholdings”, and land which meets any one of these would confirm that classification:

• over 3000 hectares (ha): Of the approximately one million land titles registered in Scotland, it is estimated that 386 have total land area of 3000+ ha and that total accounts for 20% of Scotland’s total land mass
• land that accounts for more than a fixed percentage of a data zone or local authority ward that is designated as a rural area
• land that accounts for more than a specified minimum proportion of a permanently inhabited island, recognising that many Scottish islands are less than 3000 ha and that mainland applications of policy may not be applicable to island communities and land use

There would be a requirement for those acquiring land scale landholdings to be registered in either the UK or in the EU for tax purposes.

Other proposals in the consultation include:

• a requirement for all land in receipt of land-based subsidies to be registered in the Land Register (it was noted that the Register is currently near completion)
• a new land use tenancy and a smallholdings consultation

Views are also sought on fiscal and taxation measures, community benefits and natural capital. 

The consultation also seeks views on regulating the market in large-scale land transfers, also known as “the Public Interest Test” (to assess whether, at the point of transfer of a large-scale landholding, a risk would arise from the creation or continuation of a situation in which excessive power acts against the public interest), which, it was noted, is an issue that was contained in many parties’ manifestos and is in the Bute House Agreement. 

Discussion points:

• public support: There was some support for transparency around public funding, but it was noted that this would be quite complicated given that the support doesn’t necessarily go to the landowner but to a business/tenant, and that there would be potential sensitivities around tenancies etc

• climate change: In response to a query, it was confirmed there are no specific climate change commitments in the bill, but that climate change proposals permeate across many of the proposed measures, including pre-notification requirements to protect land from incoming investment. In addition, the ethos behind land management plans will ask landowners to set out what they are doing in a climate context

• tenancy issues: The issue of protecting tenants was raised, with a range of annual and short-term tenancies to be considered and it was acknowledged that these could unlock opportunities within the tenancy sector by allowing tenants to diversify into non-agri land uses, eg, forestry. Officials noted that the SG policy aim is to have a land use system that’s flexible and adaptable with agriculture viewed as one part of land use rather than its sole purpose. It was commented that this approach should be managed carefully to ensure that landowners are not reluctant to let out land in case the changes a tenant makes render it difficult to re-let the land in future

• large scale landholdings: It was asked what work has been done to work out the number of farms/land that will qualify as “large scale” in 20 – 25 years’ time, noting that businesses will need to expand. There was some concern that the proposed 3000 ha threshold could be seen by some large-scale landowners as an opportunity to split land to bypass the regulations. A point was made about how much of the land transfer is inter-generational rather than via sale, requiring careful handling. Officials confirmed that there is a succession section within the consultation. Officials confirmed that work to quantify potential future large-scale landholdings had not been undertaken but that it was likely that powers to vary the definition would be included in the Bill. Officials also confirmed that the points about splitting land to avoid the legal obligations imposed, and succession issues, were addressed in the consultation

• natural capital: Concern was expressed that there had been no mention of natural capital, despite the Bill covering around 20% of Scotland’s land mass. This could be an opportunity to have a natural capital census and baseline it, and officials noted this point. A point was made about management plans including things like peatland restoration which would cover multiple generations/owners

• land market: The point was made that the current buoyant land market may not last so any legislation needs to be flexible and proportionate, and officials confirmed that is the intention

Officials thanked the ARIOB for its input and invited members to complete the consultation to feed in their views through that process.

Change narrative and wider engagement*

An update was provided on the change narrative that’s currently being drafted, highlighting the three broad audiences to be considered:

• existing service users who will have to prepare for change. It’s important to ensure they understand the rationale for change and that the SG offers them certainty to enable future planning
• stakeholder groups and membership organisations. One of the key pillars of the comms approach is to collaborate with such organisations in order to use their channels to communicate more widely, combined with their associated endorsement. SG will continue to plan comms and engagement with relevant organisations in advance of announcements, thereby allowing for pertinent questions to be asked by industry figures. The previous sub-group that was established worked well and this will be expanded with a view to an in-person session
• ARE colleagues across Scotland. These officials are typically on the front line of stakeholder engagement, particularly in rural communities, and need to have the right tools to effectively support customers

Activity to date around the Vision of Agriculture, Preparing for Sustainable Farming (PSF), Testing for Sustainable Farming (TSF), Agriculture Bill consultation planning and Carbon Audits was outlined. In relation to TSF, it was confirmed that positive engagement on the survey can be attributed to targeted notifications rather than a public appeal for responses. However, work will continue to assess representation and bolster areas that remain underrepresented.

Work with SG’s Rural and Environment Science and Analytical Services (RESAS) continues to build a working stakeholder engagement database, shaped by both influence and sectoral interest, to better understand system users. While messaging and communications has so far been broad, this will help tailor it to individual businesses.

There is more to do around communicating the wider picture of food production, climate, nature and biodiversity: people understand the individual components but not the whole and so the hope is to use visual aids to tell the story in a different way and in the context of a Just Transition. The purpose of developing a change narrative is to ensure that we have one central story that encompasses and runs through the programme. It will contain chapters that can be emphasised at different stages and to different audiences, and it will be used to create tools, resources and content that can be used by SG colleagues and external stakeholders.

Moving on to the support package beyond 2025, the aim is to talk about the wider framework with stakeholders via the Agriculture Bill consultation. While the detail of any conditionality is being developed through testing and working with the sector, the consultation will give everyone the opportunity to comment on this proposal. As mentioned earlier, a Comms sub-group will be reconvened, developing workable content through the consultation period.

Discussion

Some members were concerned that not enough consideration had been given to the wider civic population, particularly as part of the Agriculture Bill consultation process. Although perhaps a secondary audience it is fundamental for us to justify decisions taken and, again, making sure everyone understands the rationale behind any changes. Officials reiterated that the SG wants to hear a wide range of voices feeding into the consultation and wants to work with all.

It was opined that we should not wait until the Agriculture Bill becomes an Act to change attitudes and behaviours and that the next 3 years are critical in that respect. It was confirmed that there is no intention to wait, and that it is essential to test how this comms approach is landing so that any adjustments to support that cultural shift before 2025 can be made early. 

Others raised the issue of definitions and terminology being potentially confusing to wider audiences. The phrase “50% basic payment” is particularly unhelpful and inaccurate, as it could be perceived by the public as “money for nothing”, and the term “core payment” was suggested as a better alternative. It was also noted that it is not going to be a 50% payment immediately but will be worked towards.

Baseline expectations including workshop*

Ahead of delegates breaking out into workshop groups for this item, officials provided some context to aid discussions. At the last in-person ARIOB in March, it was made clear by members that Whole Farm Plans (WFP) and Fair Work First (FWF) should be actively considered: what they are and what they aren’t; and how they can be delivered without being simply box tickers. Whole Farm Plans are intended to ensure wider SG policy is driven to meet equality duties, appropriate use of public funds, as well as being useful for the industry.

Officials have listened to the ARIOB’s views on the forthcoming consultation, particularly on clarity of messaging and have adopted the NFU Scotland tiered language as part of the commitment to co-development. As part of that co-design, the workshop groups were asked to: address the Fair Work First principles – a core Scottish Government policy - and start looking at the broader Whole Farm Plan, to ensure it supports farms and is proportionate.

Points fed back from the workshops included:

• broader question of “what are we trying to do with plans” – it cannot be about feeding into the status quo
• it is critical to baseline information before we start looking at what we want/don’t want to do
• important to keep plans business specific
• are conditions based on just having a whole plan in place, or is it actually about the quality of the plan. Who judges quality? What does this mean for inspections? How is it evidenced and enforced? What is the role of RPID inspectors and other inspection agencies
• important not to try and “gold plate” the new system when the key considerations are the three pillars: food production, reducing emissions and improving biodiversity – while helping businesses be sustainable
• focus should be on bringing business which do less up to speed, and rewarding high performing businesses
• concerns around proportionality – do plans need to be revised annually
• consideration should be given to exempting units under a certain size so as to reduce any disproportionate administrative/cost burden
• would it be better to tackle one component at a time rather than have all these components at once eg. tackling something like animal disease eradication/management and making easy wins to start with
• training must be offered to the wider industry who may not be aware of obligations
• danger that plans become a charter for consultants - Health & Safety plans can be complex for businesses to complete themselves
• what implications would Health and Safety plans have for penalties – businesses which follow the plans can still have accidents for reasons outwith their control, is it fair to penalise them for this
• in that vein, the long reporting time of the Health & Safety Executive was referenced and how farmers should not be penalised pending outcome
• there needs to be succession planning, particularly in an ageing industry and where many farmers and crofters don’t have a will or arranged power of attorney
• could much of the information not be obtained from HMRC
• with a Wages Board already established, do we need another layer of bureaucracy with FWF
• clarity required on who the FWF does and doesn’t apply to – it is for employees only
• understanding that FWF needs to be met if in receipt of public funding but could backfire and impact upon employment if over onerous, particularly on smaller businesses and at a time where seasonal workers are already in short supply
• there should be engagement with banks when developing the policy, eg, around testing some of the loan requirements etc

Officials committed to reflecting on discussions and confirmed that future development of proposals would include working and focus groups for each area of the Plan with relevant people on-board to test it.

Phase 2 of ‘Testing Actions for Sustainable Farming’ including workshop*

Officials provided some context to aid discussions. Starting with the Phase 1 survey, interest was declared from 1200 farmers and crofters with 792 responses to date. An interim report will shortly assess representative samples and identify the approach needed for Phase 2 to obtain desired distribution across farm/participant types.

Feedback from the Board is that the list of measures is broadly acceptable and comprehensive, to a point, with some specific omissions and duplications. The Whole Farm approach and food security measures have been welcomed as has the improved clarity of messaging across the full spectrum of conditionality.

There is a working assumption that preparing structural, scaled menus to present to farmers and crofters will be a starting point and officials will help manage progression; pitching correctly how to move from Base to Enhanced. In addition, cost, complexity and capital outlay are three factors considered when compiling the menus (as displayed via Low, Medium and High obligations that relate to each proposed measure).

This scaled approach (drawing on AECS) has been used to ensure equivalence and avoid tokenistic measures with the opportunity for all who take part to ramp up their own ambitions to achieve specific outcomes. The menus contain high level overviews of measures but the final document will include full descriptions of requirements – and co-design with ARIOB will help shape that. It was confirmed that the menu of measures is an iterative process and there will be further opportunity to feed into that.

The objectives of the pilot are four-fold:

• TSF will inform the ‘enhanced support payment’. It is not considering the ‘conditions’ of the base payment or elective support, but any learning will be shared
• to develop a list of actions that are appropriate to be a requirement/condition of future support
• to develop an understanding of the data that can demonstrate delivery against outcomes
• to test the practicalities of delivering these actions on the ground.(menu design, logistics, verification)

What will success look like? Key to that will be a mixture of on-farm and theoretical testing and that the plan is delivered within budget and timescale.

Ahead of the workshop, there was some immediate discussion based on the scene setting. One member said that the workshop questions were “low-level” and that the list itself lacked cohesion. Officials were sympathetic but want to take advantage of this window of opportunity to do some things, acknowledging that doing everything would not be feasible. That is where the mix of on-farm and theoretical testing will come into play – what can we deliver and where can we add value in the context of delivery in 2025? However, 2025 is not the end date, this work will continue to iterate and evolve. What we do today will create a framework to allow enhanced payments to continue to progress and work to start building that mechanism begins now.

Guidance around tools which lead to SG outcomes would be seen as advantageous by members to aid delivery. Any farmer and crofter who has completed a Carbon Audit will be able to identify its baseline and priorities for action based on that and each farm will have different priorities and issues. However, it was made clear to members that today was not about testing specific measures, it’s to have robust discussions on the supporting systems around the measures to ensure rigour.

Three workshop groups were asked to consider two questions: Given time and financial parameters, we propose to use both on/off-farm testing to gather the most meaningful outputs. How can we get the most value from this approach? What measure should be tested on-farm versus off farm? and How do we ensure farmers choose the most appropriate measures for their location and enterprise, that will deliver maximum benefit for the vision?

Comments from the workshops were as follows:

• look to what already works – Defra, agroforestry and SRDP scheme monitoring and evaluation were given as examples and can help baseline
• provide exemplars of best practice, peer-to-peer case studies with the help of industry leaders to provide for knowledge transfer
• assist those behind the curve and reward those ahead of it
• recommended to test the breadth of what is considered challenging – easy options might actually just move into baseline requirements
• concern that just having a list of measures won’t deliver because they are in isolation, make clear the strategic benefits of measures in packages and the ultimate outcomes
• the menu of options needs to feed into and be linked to broader business planning with a long term perspective
• important there are not gaps in SMR, GAEC, then use enhanced payments to build on top of this
• private and public finance alignment still has to be fully established to demonstrate value for money
• value of bringing farmers together in a room to say what options will work and to reflect on historical/existing data
• there may be stumbling blocks for some measures, this will link to farm size, type – options may need tweaked or weighted as a result
• importance of setting the bar high enough to make a difference, but low enough to involve almost everyone
• aggregate carbon audit case studies – are they achieving the reductions we’re looking for?
• concerns that key industries – horticulture, pigs, poultry, not currently included in the options. Need a wraparound to include these sectors
• need to consider RPID deliverability – manageability, capacity for advice, chances for businesses to work with neighbours
• don’t want to be prescriptive but want to help farmers choose – AECS gives management options which are available to the farm, could this be an option
• suggested there could be a split between “BPS type” measures and “VCS type” measures, split measures under different activities, decides what proportion of the land is under action
• work needs to be reviewed on an ongoing basis, including qualitative data

Action: ARIOB members to feedback their comments on the proposed options for officials to consider.

SRUC modelling work*

The Board heard a presentation on Future Agricultural Policy - modelling Regionalisation Options on behalf of SRUC, the James Hutton Institute and Pareto Consulting. This work is part of a programme of analysis, and is by no means the full picture, but is presented with a view to being as transparent as possible with the industry.

The modelling took the current budget of £405m - currently spread over a region of 3.8m ha and the options looked at how that would be distributed under different approaches. In terms of the percentage split between Base and Enhanced, the original analysis was split 30 / 70 so further adaption possible depending on which payment framework is taken forward. Currently, the lowest 10% of recipients receive 0.54% of the pot and the top 1% see 10% of it. 

Five different options were presented beyond the existing baseline region 3 model:

• a single flat payment rate across all hectares
• a single flat rate payment scaled back to ’actively farmed hectares’ (AFH)
• a single flat rate payment based on standard labour requirement
• a 2 region model where current R2 and R3 are merged
• a 2 region model with SUSS budget included. This was done to include all types of livestock so as not to disadvantage any farmers or crofters, and with a view to showing monetary gains/losses across the piece

In addition, two further options were presented which take into account split grassland and permanent pasture and would allow starting to think about conditionality for arable, grassland and rough grazing:

• region 3 - Combine and Split
• region 3 - Combine and Split, and add SUSSS

The options outlined had positives and negatives for different sizes of farm and different types of farming. 

Any change in base, or core, payment approach would require a transition period given the other potentially significant changes taking place, and a continual monitoring to assess businesses’ capacity to deliver policy objectives with the funding they receive.

The definition of “activity” may be updated to meet objectives.

LFASS (or successor) was not included in the modelling as no decision has been taken on this yet.

Decisions on whether remodelling is appropriate will ultimately be taken in the context of budgets, EU alignment and WTO obligations.

Discussion

A point about stability was made, and the sense in making significant changes to this now when farmers were going to have to deal with what’s coming with Track 2. A plea was made to be coherent and clear around what is intended and how it all aligns.

The focus must be on what is going to deliver the desired outcomes and that the big challenge will be moving away from a historical focus on income support and tinkering with existing mechanisms, into developing a system which is explicitly aligned with the three pillars of sustainable and productive food production, tackling climate change and improving biodiversity. It was agreed that if producers do the right thing for animals, soil and nature, everyone benefits. It was queried then, whether it really mattered where the money went as long as it delivered these intended outcomes.  

There was acknowledgement that whatever is done, it must allow us to be sufficiently ambitious to achieve Net Zero targets. 

A suggestion to consider promoting coupled support was made (citing Northern Ireland moving to 18% CS) and this this would be an opportunity to incentivise arable regions to provide protein crops.

There were some fears expressed – though this was not a consensus view - that using livestock units as a key measure of AFH will drive “gaming the system” with ghost hectares, a bigger spread and some farmers and crofters keeping otherwise unproductive animals, and that the 0.8 livestock unit classification was perhaps a contradiction to health planning. In that respect, some commented that sustainable farming measures added to any base or core payment would be a good step towards facilitating greater change.

Some pointed out that much of Scotland’s land in receipt of public funding would, by this AFH definition, be considered inactive, with AFH only accounting for half of funding (with conditions on food security / stability) and the remainder weighted on climate and nature activity.  

It was pointed out that smaller farmers / crofters may not be the most active of businesses in the context of AFH, yet are delivering a disproportionate benefit in socio-economic terms and biodiversity, and are more likely to employ more labour per unit of output. The SRUC public attitudes survey indicated that the wider public have a strong preference for supporting smaller farms. A further point was made that smaller businesses cannot access the economy of scale which larger farms can, so the smaller farms should not be disadvantaged. A sliding scale of front-loading and capping was made to ensure equity. A balance has to be found to make a high enough bar for the conditions to be meaningful and impactful, but low enough for universal uptake.

There was broad agreement that parallel social and environmental analysis should be carried out alongside selected scenarios to carefully examine the impact upon social structures in rural communities and the implications for them, especially as the majority of funding remains direct payments. It was confirmed this work will be taking place.

The Board agreed that they needed to consider this work in greater detail, and the suggestion that the two most popular options be examined in comparison to the current one was agreed.

Action: ARIOB members to inform Secretariat which two of the options proposed they wish to examine in more detail.

Summing up and any other business

Officials summed up the day and its discussions, noting particularly the value of the discussion that stemmed from the SRUC/JHI/Pareto Consulting presentations and confirming a consensus in the room to examine two preferred scenarios (as will be indicated by returns from ARIOB members to Secretariat). Officials noted the clear steer that farmers and crofters should be in no doubt as to the direction of travel and, in particular, what they have to do in order to receive enhanced payments. Officials also acknowledged that any changes made must be carried out to drive the Vision for Agriculture but in a way to cause minimum upset and disruption to an industry already under pressure: in other words, proportionality is key. Any potential changes to the current approach will need to be modelled to ensure impacts, risks and opportunities are identified and clearly understood.

Looking ahead, and with regard to post-2025 budgets, the UK Government hasn’t yet told our Defra counterparts what their budget is likely to look like and that will have inevitable consequences north of the border so officials will continue to monitor that closely. However, it is within the gift of Scottish Ministers to spend the money available on proposed policies to best deliver.

Feedback was noted on Whole Farm Plans and officials will go away and digest – what do we mean? What can we test within the timeframe? How do we best test? For testing in theoretical terms, can we provide exemplars to the industry? Thinking again about the Framework as a whole, we must consider how we support and train people to interact with all the different elements – both at the pilot stage and future rollout. Communicating all this from this room to the farming sector needs immediate improvement, conveying our messaging as widely as possible and in an appropriate way.

Chair offered a huge thank you to all, noting that the group could have spent a full day on each of the agenda items, such was the strength and quality of discussions. The next meeting of the Board will be an interim one on 24 August and a chance to follow-up on conversations held today. On comms, Chair agreed with ensuring we all understand what the messages are so we can disseminate more widely and be confident in our approach. Chair concluded it had been a valuable and important session and handed to co-chair for his final remarks.

Co-chair reiterated Chair’s gratitude to members and reiterated the point that the industry is desperate to know what’s going on with regard to future agricultural policy. Co-chair added that there is lots of positive work going on, but, as referenced, our messaging needs to improve. Co-chair felt two topics resonated with him – Whole Farm Plans and baseline conditionality measures and, tying that back to messaging, perhaps some thought needs to be given to revising our terminology and definitions.

Secondly, Co-chair wanted to recognise the vital role of smaller farmers and crofters from socio-economic viewpoint and said that this may need looked at in more detail.   

Finally, Co-chair expressed satisfaction at the productivity in a face-to face meeting, and looked forward to doing so again in the very near future.

Date of next meeting: 24 August 2022

* Some speakers used Power Point presentations to illustrate their talks. Where the author has given permission, these are available on request, using the contact address below. Please note, these remain the copyright of the authors and should not be used for any unauthorised purpose.