Agriculture Reform Implementation Oversight Board minutes: 31 May 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 ninth in-person meeting of the Board, noted apologies and opened the floor to any comments ahead of the first substantive item.

One member voiced concern over “mixed messages” from the interim meeting on the Code of Sustainable and Regenerative Agriculture - they were left with the impression that measures in the draft code that are currently optional are likely to become mandatory in short order. Officials sought to reassure members that the code will be a guidance document only. On the back of that, others felt this was emblematic of a more generic communications problem and that as public-facing representatives of the Board, some members feel uncertain what can be said with any certainty about the next 3-5 years. Members were keen to see ARP improve its comms approach.

It was flagged that a report by the SRUC on the impacts of the new agricultural support framework on agricultural businesses in Shetland, Orkney and the Western Isles has yet to be published but when it is, it should be circulated amongst the Board (and more widely) due to its pertinence to ongoing discussions. It was noted that the report was raised at the last meeting and not included on the minutes. Co-chair agreed to discuss the report at a future meeting of the Board, whether that be in-person or online, and an action was taken (to add to the workplan in the interim and for the Secretariat to circulate the report upon publication).

On the actions from the last meeting (March 2024) one member felt a lack of assurance that issues concerning common grazings are being considered in a meaningful way. An action was taken to add it to the workplan for future discussion (Q3 2024).

In relation to the AAP’s paper on Academic Advisory Panel – Water scarcity and excess, there was a word of caution over the use of emotive language with an ask for care in how it may be translated into policy.

ARP scene setting: Agenda item 2

In order to set the context of the day’s discussions, particularly in relation to Tiers 2 and 3, Chair provided an update of the Agricultural Reform Programme (ARP). The Programme’s current focus is on developing a viable and realistic delivery plan for the sector, prioritising deliverable achievements with the resources and systems we currently have. What that means in practical terms is that until 2027 the Scottish Government will support change using existing infrastructure, technology and schemes – which farmers and crofters will be familiar with. Broadly speaking:

• 2025: we have recently provided additional details on changes in the Route Map (Cross Compliance, Whole Farm Plan, SSBSS) that were developed with the aforementioned deliverability in mind
• 2026: changes will be aligned to the ambition of Enhanced without changing how farmers and crofters engage day-to-day with RPID staff.  We are looking to change our ways of working but not our ways of administering
• 2027: some schemes may need to be delivered for longer than previously anticipated to provide time and resources to be invested in new systems and processes. However, the Vision for Agriculture remains unchanged – the mechanisms we use may be the same but we will repurpose them to achieve our outcomes
• 2028 and beyond: We want to invest in new technology that allows us to streamline our processes and reduce complexity for all users.

Officials added that this will be considered against what is published within the route map and that, in response to earlier concerns, comms will be the number one priority over the next few months. The ARP SRO has already had 1-2-1 discussions with many members of the ARIOB and is keen to lean on the network of comms from within the ARIOB itself.

Comments from members

• response to a query about the review of regions, officials confirmed that the immediate priority is messaging around 2025 and 2026
• work is continuing on regions but requires a full-scale technical assessment as the entire system needs to be rebuilt in time
• however, in order not to lose sight of it, it was an agreed action to add the review of regions to the Board’s workplan
• there was some concern that there is not going to be substantive change until 2028 at the earliest, especially given the perceived incremental approach as outlined earlier. this could open a huge gap between expectations at the start of the process and, with 2030 looming, comms need to be improved as a matter of urgency
• one member commented that this will be a public system rather than simply for farmers and crofters so the focus shouldn’t be too narrow
• there was a question about the new IT system and officials clarified that SG will evolve the existing system with testing being undertaken to match the end vision (cost/benefit analysis)

Enhanced (Tier 2): Agenda item 3

Officials provided an overview of the work undertaken since March 2024, including the Discovery, working assumptions, delivery mechanisms and options for 2026.

From an operational perspective the first tranche of Enhanced will be delivered using existing technological systems (in the short-term) without losing sight of the objectives and identifying opportunities to deliver meaningful policy change. This first iteration (2026) will start to contribute to the long-term ambitions of the programme with ambitions growing as it develops but is an  initial pragmatic step in the process and not a scheme on its own. The more bespoke the system, the more expensive it will be to build and maintain.

To clarify a question from the floor, Digital Scotland Service Standard (DSSS), which requires a minimum standard across all SG IT, only applies to new systems so the existing mechanism is out of scope for DSSS purposes.

As part of the Discovery, a number of existing systems were considered but Greening was the only one identified which could realistically deliver the vision of Enhanced and deliver ARP outcomes.

In terms of stakeholder engagement, there was no objection to using existing mechanisms to deliver Enhanced (Greening the “obvious” choice), with respondents mindful of the transition, the need for a phased approach and highlighting the benefits of user familiarity. There was a request to ensure early sight of significant changes.

Comments from members

• the proposed approach was broadly welcomed as a pragmatic starting point given the obvious operational, IT and financial challenges
• this isn’t by any means perfect so there was a desire amongst members for further ambition in the second iteration
• an opposing view was offered that the transition period has already been a lengthy one if you consider that to be from EU Exit onwards
• the issue of comms was raised again – there was an original expectation that Enhanced would deliver on a greater scale than simply adding conditions to existing base payments
• there are mixed messages about whether that will deliver substantive change and building on Greening indicates a similar problem
• it should be made clear that there are conditions attached to Base (Tier 1), not just Tiers 2-4. Comms should rightly primarily focus on businesses affected, but should also think about people who won’t be impacted immediately, but may be in the future
• farmers and crofters are a different starting points in the process of change
• rewarding good practice was mentioned, although acknowledgement that identifying/quantifying what already exists will be challenging – although RESAS officials are working on baselines and people are currently rewarded for permanent grassland under Greening
• a potential renaming of Greening was brought up but acknowledged by officials that the current IT would not allow for changing the name Greening, but the term used in guidance and communications could be added to (e.g. Enhanced Greening) to demonstrate the change
• evidence on Greening as it currently exists is required to baseline and make big decisions on its future
• an action was taken for the AAP to establish the current value of Greening, including options for permanent pasture
• in response to a point on data assessment, SG is working with NatureScot on habitat mapping and managing land use data via farmers and crofters who submit a SAF
• environmental data is not just between farmer and government but the supply chain; – who owns and controls the data is very sensitive. LPIS should be a tool to measure changes and provide information for farmers and crofters to help their businesses, we needn’t reinvent the wheel
• there will be opportunities to develop this thinking through the ARP Target Operating Model (TOM) which is to be drafted. An action was taken to add to the TOM to the workplan for the Board to discuss
• there was some concern about potential double accounting with what is required by commercial partners and government, with acknowledgement that the current market is immature and we can’t commit farmers and crofters to something where the landscape is changing, especially when economic viability is still to be determined
• there was a concern raised at using organics as the default example of existing good practice. Officials stated that it is so often used because it is a clearly defined, accredited scheme
• suituitable business types need to be mindful of geographical differences (East and West). On the subject of regional bases, it might be argued that we are putting all of our eggs in one basket with Greening and that the lack of a significant “package” is problematic
• the discrepancy between Region 2 and 3 payment rates was raised, with a worry of how that would impact claimants if no change until 2027 – i.e. an effective “underpayment”.
• this must be sorted before the rollout of Enhanced. Officials said that the Regions discussion was always meant to take place after Enhanced and that is still our intention (and also added to the workplan as per earlier action). Any discussion on this should also cover SUSSS and consider unintended consequences which is why this should be addressed cautiously
• there was a request to engage with agents on how the tiers will work as a collective, while considering wider behavioural and peer-to-peer support to avoid creating an agents’ charter
• in response to mob grazings within Enhanced, this is unlikely to feature in the first iteration but may do so in the future
• enhanced will initially deliver in the short term, but iwill have a further look at examples of where capital investment is required for longer-term change
• High Nature Value farming, mixed farming, permanent grassland and crop diversification were all discussed with agreement that they couldn’t apply to those for whom such conditions would be impractical/uneconomical and that they often require significant capital expenditure (as also mentioned above)
• inintended consequences were again considered in the context of increasing the percentage of EFA grassland and what businesses may do to offset it (thereby skewing the real picture of EFA “on the ground”) but this is all still to be considered
• It was argued that arable farmers already do a lot of the “heavy lifting” and that increasing the burden on them would be unfair
• officials agreed that a unified approach is required where everyone is being asked to contribute towards collective benefits
• on the 26 existing mechanisms (of which the vast majority were discounted) action was taken to provide the Board with the criteria used to assess them
• on thresholds for payment, there has yet to be a decision taken on this for Greening but it will be made clear what is expected to receive it – the terminology will be critical to good uptake – but equally, it should be made clear that some farmers and crofters won’t receive a Tier 2 payment if they do not meet conditions
• enforcement of that is necessary to enact change
• a member raised the possible opportunity for activity for habitat and species management under AECS to be used to demonstrate meeting enhanced requirements like organic farming but it was noted that there was a danger of double-funding
• loan permanent grassland, this is definitely an option for the future, noting that new EFA options will be difficult to include in terms of IT
• however, the real risk on permanent grassland, again, is unintended consequences – the potential to export EFA onto hills, for example
• there was hope that there could be rules within packages to prevent this type of issue and promote as an opportunity rather than to further divide opinion on the topic
• there was some discussion with regard to nitrogen use and an action to circulate a report mentioned by a member
• co-chair requested an action to be taken on specific options/measures, either at an in-person or online meeting and it has been added to the workplan

Elective (Tier 3): Agenda item 3

Following on from the introductory paper in March, officials offered an update on Elective developments. The tier will comprise of a competitive range of payments from 2027 (AECS will run until then). The initial principles are high-level and ambitious and may not all be fully achievable from 2027 but are starting with high aims. The 5 principles behind Elective, in summary, are:

• 1: specific interventions to deliver for nature and climate aligned to regenerative and sustainable agriculture
• 2: delivering outcome-focused interventions to incentive applicants to go above and beyond
• 3: competitive and non-universal, as well as being the primary capital funding injection
• 4: focus on change, not maintenance
• 5: enable landscape-scale projects and dovetail with private investment

Ultimately, tiers 1 and 2 need to be successful for Elective to flourish and, given the dependencies, the 2027 date is not set in stone. There will be four phases of development, with stakeholder engagement in the near future. Rural Land Use Partnerships may be included in the Elective tier and conversations are ongoing. Chair said that the RLUP’s pilots evaluation is underway.

Comments from members

• members were broadly receptive of the initial structure, noting that cultural change in areas without subsidy can be delivered through Elective but this will be tough given the comparative lack of funding competitive to other tiers
• elective should be open to farmers and crofters who only want to take advantage of Tier 3, pigs and poultry for example, so Tiers 1 and 2 should not be pre-requisites
• the presentation focussed on nature restoration but members sought reassurance that the tier would give equal footing to rural development/innovation and supply chain
• continued conflation of sustainable and regenerative agriculture and nature restoration must be avoided
• this should be broadened to include habitat restoration, woodland support and climate adaptation within the principles. Systemic action around climate resilience, water retention, soil management and erosion as part of ecosystem function was also suggested
• flexibility will be required for farmers and crofters looking to make transitions, particularly as the private investment sector is growing
• it was opined that private markets are looking to buy from “Scotland PLC” so money could be distributed centrally to facilitate this larger scale approach
• ultimately, though, private investors expect a return so there needs to be caution about them providing the structure
• the Minister voiced concerns of the industry losing its natural capital value. Chair added that a Natural Capital framework is currently under development
• the biggest hurdle is that SG can’t provide a level playing field framework and there was some frustration that the industry is again being asked to do the “heavy lifting”
• AECS was argued to be the only pot of money that can deliver for priority species and their agricultural management. It was hoped that this tier would be more than “AECS mark two” but it will struggle if 70% of the budget is allocated to Tiers 1 and 2
• there was universal agreement that Tiers 3 and 4 need greater resources to be delivered as envisioned
• on AECS, a move towards capital focus would be a departure from how the scheme currently works in some areas and there needs to be maintenance funding for keeping habitats
• on common grazings, committees often make the claims so it is important that what happens in practice is that the money stays in the common grazing fund to maintain and manage it
• officials need to talk to people about current operations and practicalities, it can’t be an afterthought
• landscape scale was welcomed but some worry that funding could be dominated by large landowners when a number of smaller farms might struggle to meet the threshold but could deliver a huge amount
• new entrants and next generation should be addressed – they need sufficient capital support to deliver the benefits of the new framework
• there was a reminder that the budget is half of what it was 20 years ago in real terms and it continues to fall. There were competing views on where the money has to go and there has to be acknowledgement that not everyone will be content

LFASS: Agenda item 5

For the final item, officials sought to achieve a shared understanding of the complexity of current LFASS delivery and what its limitations mean for reform in context of the ARP. SG is working on the basis of LFASS as a tactical interim solution to dovetail with Tiers 1 and 2.

Officials gave an overview of the present model with unanimous agreement in the room with regard to its complexity. LFASS is responsible for a significant amount of funding recipients (3ha minimum), the largest of whom are tenants and crofters, who help provide wider societal and rural economic benefits. Frozen values are specific to every business, with payment calculation then based on a combination of grazing category, minimum stocking density categories and cattle multiplier. This results in individual calculations across 11,000 claimants and 2.8m ha of land.

While this will be an interim solution, there will be opportunities to include some of the desired policy options, including a mechanism to do something for the sheep sector.

LFA support aligns with the Vision for Agriculture, will aid the transition and maintains and promotes farming systems through agricultural use. There may be scope for support to become more targeted over time to ensure this element of support goes to those in the greatest need.

Officials stated that they will approach policy development working alongside the Disadvantaged Areas working group and have already met informally with the Chair.

Comments from members

• most people are unaware of how their payments are calculated and we need to better set out the rationale behind it, as well enabling it to better help those in more disadvantaged areas
• there was a view that, despite its complexity and that it has “tried to do too much since its inception”, it has delivered, especially to prevent land abandonment in the hills and uplands
• go right back to first principles – farmers and crofters in more disadvantaged areas are getting too little out of the current system, as well as LFASS
• there was agreement that research is required to build a solid evidence-base for  any decision to change/replace LFA support
• this needs to be looked at in the round, alongside the regions review to provide a full picture of available support in the future
• the aforementioned SRUC report includes relevant information about business scale across the island groups, namely the disproportionate costs in peripheral areas
• clearer reasoning behind decision-making is required, especially if it is largely being driven by historic IT difficulties
• officials added that they are currently working out how effective current systems are – the next iteration of the tech needs to be flexible enough to last longer and do more
• vibrant local supply chains should be encouraged rather than throwing money at existing national networks
• a number of questions still need to be answered but there was a plea to take time to get them right (consideration of wider outcomes) and simplify the model for all
• next generation farmers and crofters must be taken into account with regard to LFASS next steps, perhaps in Tiers 3 and/or 4
• they are the future and require proper support to remain in the sector and stay there in the longer term
• chair agreed that the next generation must be considered in this as they will have to deliver any future system

Chair thanked members for their contributions and looked forward to the Board’s next meeting in the Autumn (date TBC).

End