Agriculture Reform Implementation Oversight Board minutes: 4 March 2022

Attendees and apologies

Chairs

• Cabinet Secretary for Rural Affairs and Islands (co-chair)
• Martin Kennedy (co-chair)

Items and actions

Welcome and introductions

Cabinet Secretary for Rural Affairs and Islands welcomed everyone to the first face-to-face meeting of the Agricultural Reform Oversight Implementation Board (ARIOB), and thanked members for making the journey from all across the country to the Dewars Centre in Perth.

Chair acknowledged the busy farming period as we enter Spring, and stated that participants giving up their valuable time to support the Scottish Government’s development of future rural policy is not something Government take for granted.

Co-chair echoed Chair’s welcome, and stressed that it is impossible to understate the challenge ahead at this critical juncture. However, he noted that this is a golden opportunity to make meaningful and positive changes for Scotland’s farming future. 

Before moving to introductions and business of the day, the Secretariat reminded attendees of the requirements around controlling the spread of COVID-19, including mask-wearing when moving around.

Academic Advisory Panel update

Chair then invited the new Chief Scientific Advisor for Environment, Natural Resources and Agriculture (CSA), and new Chair of the Academic Advisory Panel (AAP) to introduce the AAP to the board and provide an update on the panel’s work.

CSA outlined that the AAP are cognisant of the pace of global change and how that fits into the work of the board and so envisages the Panel as both offering its expertise on critical issues to the ARIOB, and taking instruction on what the board would like them to examine. The Panel are able to work closely with the SG’s RESAS unit as well as with SRUC: both of which act as knowledge brokers providing evidence on the impact of different policies. Before inviting Panel members to introduce themselves and provide an overview of their background and experience, he stated his aim that the panel and board build a strong rapport over the next few months.

Animal health and welfare

Scotland’s Chief Veterinary Officer (CVO) provided the board with an overview on the challenges facing livestock farming in a climate change context. CVO reminded the Board that whatever we eat will have an impact on the environment. Food in Scotland should be produced to the highest possible standards and a starting point for that should be healthy livestock which, because they consume fewer resources than diseased animals, are more efficient, thus benefitting both the climate and profitability for producers. That efficiency should be the result of inputs becoming outputs with as little damage to the planet as possible.

As part of that process, we must do more to monitor and attempt to eradicate animal diseases: for example, the BVD eradication scheme has reduced prevalence of BVD from 40% to just 6%. A side benefit of the scheme was that there was reduced immunosuppression in herds which required fewer antibiotics.

There are obviously other diseases to tackle to ensure more efficient breeding and production. It was acknowledged however that the tools to tackle other diseases are not yet of sufficient quality to run country-wide, citing Johne’s as an example, but the principles of what was done to reduce BVD can apply across the board, including to other livestock sectors – this is something the SG is looking at. Effective control is possible at herd level, for example, removing unproductive cattle will immediately stop the spread of disease and adhering to the principles of eradication should be prioritised.

CVO warned that it can be difficult to provide evidence of quantifying savings so the benefits must be clearly communicated. SRUC are exploring how to quantify carbon emissions via livestock inefficiencies, but the question is how to incentivise the industry to reduce emissions. CVO suggested that incentivising the farmers to reduce disease will address the challenge of emissions reductions as a by-product.

The board recalled its previous AHW discussions (21 January 2022) and the fact that, although 10,000 QMS members are already conducting AHW plans, the vast majority view it purely as a tick box exercise and don’t use it to change on-farm behaviours. It was agreed that steps must be taken to avoid this, and to make sure that future AWH plans ensure the collation of quality, useable data which can translate directly to visible improvements. There was a view shared that the welfare aspect should be a given and not be part of any conditionality.

There was also consensus that there is also an onus on the veterinary sector to play its part and it was suggested that paying vets by the hour rather than by drugs required would lead to the desired improvements.

There was broad agreement that the pillars of effective AHW were:

• policy and funding support (to enable industry to eventually self-help)
• increased productivity and efficiency
• collation of best available data
• reducing the carbon footprint

A note of caution was sounded that increased productivity would inevitably lead to increased production and therefore to increased emissions (known as “rebound and backfire”).

There was also appreciation of the difficulties where neighbouring farms who don’t follow procedures to prevent/eradicate disease, pose a risk to those who do (particularly sheep scab), and there was some discussion relating to rolling out any such scheme at a national level. The board were in agreement that a collective push towards elimination and eradication is necessary, not simply relying on repeated vaccination.

A point was made that Defra counterparts are already pressing ahead with their AHW pathway and Scotland should look to keep pace with such work and signal to the industry the intended direction of travel.

It was hypothesised that ClimateXChange’s Livestock Health & Greenhouse Gas Emissions report could be used as a basis of quantifiable evidence to help reduce GHG emissions and establish which animal diseases can be targeted in a similar fashion to BVD.  This could have the potential for incentivised, tailored KPIs on a per-farm basis, which takes account of the unique nature of each business, allowing farmers and crofters to tackle any internal weaknesses. The report’s 2016 publication date was mentioned but many felt the principles therein remain relevant today.

CVO was clear that responsible farmers and crofters will routinely test their animals, including a percentage of fallen stock, to confirm status of the herd and take remedial action. It was pointed out that a number of diseases are hidden and so it can be hard to convince people to pro-actively vaccinate without seeing obvious benefits, so some sort of conditionality through incentives is necessary to tackle inevitable apathy. On the flipside, it was rightly pointed out that many businesses are doing excellent work in this area and must be recognised and rewarded for their efforts, especially to make sure they keep going in the right direction and don’t become disheartened if the focus shifts to those further behind.

How to monitor was discussed, and it was suggested that the Farm Assurance Scheme is a good foundation from which to build, particularly as market forces will drive improvements in AHW.

Chair and co-chair noted that this was a significant topic, and agreed that there must be a balance between choice for the farmer and conditionality. Both were keen to move this strand of work forward through conditionality-linked programmes for targeted diseases, and to welcome in those who haven’t created (and acted on) AHW plans previously by ensuring its availability to all, in the same way as the schemes featuring in Track 1 of the National Test Programme (NTP).

CVO proposed establishing a sub-group to look at what can be done to improve AHW; examining the recommendations of the farmer-led groups; and folding in conditionality to any plans. An action point was taken and potential group members were suggested.

Framework*

Officials provided an overview of a draft high level CAP replacement Framework to deliver the recently published Vision for Agriculture. It was explained that a significant new Agriculture Bill is required to deliver the replacement for CAP, and the powers sought to make payments must demonstrate ability to deliver upon legal obligations (climate and nature restoration) as well as specific and broader policy outcomes all linked to the National Performance Framework. A number of impact assessments must be undertaken to ensure that the Bill does not adversely affect fragile communities, eg, islands; that it delivers for all of Scotland; that it ensures a Just Transition; and that it is in keeping with the requirements of the Scottish Public Finance Manual (SPFM).  Officials are also conscious that legislation, and its requirements, need to align with operational needs and capacity, and Government are considering the necessary capability and resource implications.

The draft Framework proposes a three tier system of base, enhanced support and elective payments which aims to be universal, regardless of where farmers may be on their respective journeys, and offers a choice of payments based on conditionality take up. 

Officials stressed that the Scottish Approach to Service Design commits the SG to co-development and co-design using a hive approach, incorporating the ideas and input from the ARIOB and other stakeholders through various means, including a formal consultation.

Officials then ran through a timeline for the SG’s Vision for Agriculture (2021 to 2026) covering ARIOB, the NTP and consultation, and subsequent Agriculture Bill. A holistic approach will be taken, acknowledging the different forms of land management, and Track 2 of the NTP will broadly contain:

• an overarching Framework
• a model for future direct payments
• enchanced incentivisation
• capital grants
• elective payments
• fair work criteria in line with the SPFM
• a baseline for AHW plans
• detailed co-design with industry partners (including ARIOB)

There will clearly need to be co-ordination with current payment systems while we moved towards more conditionality to avoid any disruption.

Discussion opened with a view that intervention logic can provide multiple benefits, including environmental, rewarding actions based on emissions reductions. It could and maybe should also be argued that what are currently viewed as enhanced or elective payments now, will be base level in less than 10 years’ time.

Members felt that the examples provided in the presentation were useful and welcomed the flexibility to change if necessary. Dynamic legislation was mentioned as being equally as important in terms of flexibility because there must be more communications and collaborationaround this because the messages are still not always being received on the ground.

The issue of definitions, particularly around regenerative agriculture, was discussed, and there was a view that ARIOB could set the policy definitions of such broad themes. In addition, it was opined that the ARIOB should be informing ‘big picture’ thinking – where do we want to go and how do we get there?

Some felt that the Bill should be clear on what the Government will fund, or offer financial support towards, and what it won’t. Others wondered if there needs to be more creativity around statutory targets, allowing more for that flexibility and room for manoeuvre as we learn from the inevitable errors over the next 5 years.

Discussions turned towards potential apprenticeship schemes and associated funding to encourage young people into the sector and stay there, thus helping to deliver intended outcomes.

The Scottish Parliament will carefully analyse the Bill and will likely include a sunset clause, particularly as a new Parliament will convene from 2026, so the detail to follow is crucial.

With regard to collaboration and an approach that fits all of Scotland, it was noted that there is the potential for the Regional Land Use Partnerships to be used to help implement a tailored approach, but it was agreed that there needed to be more comms around them.

CAP payment analysis*

Dr Keith Matthews from the James Hutton Institute presented on the analysis of the evolution of CAP payments from 2014 through to 2019 and suggested that it may help inform the future of direct payments.

The analysis details:

• the move from SFPS (historic) to BPS + Greening (area based, regionalised)
• for VCS the move from SBCS to SSBSS (Mainland and Island) and SUSSS
• adding Pillar 2 beyond LFASS, previously for Ag Strat Champions
• using 2019 as baseline for future planning
• ways to judge qualitative fitness for purpose against the intervention
• logics and policy narratives (geographic and other dimensions)
• comparing payments in 2014 with 2019
• distributions of payments relative to other land use phenomena
• which land is included and business structures (new, existing, leaving)
• complete outputs

Dr Matthews provided a summary of the 2014 payments landscape and where payment associations lead to outcomes, as well as the overall scheme mix where Single Farm Payments made up the majority of funding. Post-2015 saw a move to the coupling of basic and voluntary payments with early enhanced conditionality as part of the greening scheme.

2014 to 2019 saw an increase in payments due to, amongst other factors, a 14% exchange rate increase and people in receipt of a higher ratio of payments. It also saw an increase in new businesses, or those who weren’t originally part of schemes as of 2014, as well as those leaving the industry.

On the breakdown of payments and how they might inform thinking going forward, Government should consider regional variations and the wide range of farm types as there is a lot of money going to bigger businesses and designated areas and this is clearly caused by area-based payments. For example, the top 1% of businesses are in receipt of over 10% of the total funding pot.

At this juncture, officials provide their thoughts. Following on from that last point:

• there is undoubtedly an underlying complexity to assigning level of payments by farm type
• would small businesses receiving most of the available funding lead to desirable outcomes?
• we will be led by societal change as much as other factors mentioned – do we have a detailed grasp on what we want to do differently?
• there is scope to deliver change but this will require bold and progressive policy and Government wants to have that conversation now, as previously mentioned, ahead of the Bill process commencing
• if redistribution of funding is to be seriously considered, the regional system does not allow for that and so operational capabilities would have to be assessed
• simplicity must be at the heart of future payment mechanisms, in part to keep people living and work on rural land

In the wider discussion, there was a view that critical mass was essential to work on a supply chain basis, particularly as there are sectors under threat of abandonment, such as beef, if future payments lead to unviable businesses. A breakdown of payments should be the starting point when considering such significant change.

Industry stakeholders should help inform this debate. They need to know predicted bottom line figure projections: ie, what it will mean for profitability and turnover, as around 40% of turnover is from farm support payments: in itself this should be an important policy consideration. There was, however, some acknowledgement that this would be difficult in terms of accuracy.

There are approximately 17,000 payment recipients and the Fair Labour Report from 2016 should be considered as the most detailed analysis on people. It will be tough to get this right due to the changing size of businesses as well as new entrants and so ongoing monitoring will be critical.

Future conditionality

Chair introduced this item as one of the biggest considerations of farmers today when thinking about what the future holds. To aid the board’s discussion, it heard three presentations on the issue: from SRUC; from NFUS and from SE Link.

SRUC – Scottish agricultural policy: keeping conditional direct payments in the mix*

• Andrew Moxey and Steven Thomson from SRUC (also members of the Academic Advisory Panel) gave an overview of what SRUC see as the ‘policy problem’, in other words, how can we secure greater provision of ecosystem services while still meeting targets and achieving objectives? This is especially tricky when taking into account the fact that there is an under- provision of public goods by markets
• distribution of support is a divisive issue, subject to lobbying and politics as well as what farmers and the wider public expect. We know where we’ve been, as demonstrated in the previous presentation, but where do we want to go? There is an assumption of private land ownerships but is there scope for public ownership? Should payment be linked inextricably to deliverables or to outcomes?
• policy makers must be mindful of the public’s perception how rural funding is applied does not mirror the reality and that is why any future path and policy mechanisms relating to rural funding should be clearly communicated and mindful that it is applying taxpayers’ money
• we should take some reassurance from the policy disruption being felt across UK administrations on this issue in that we are not alone. We can look to Defra’s thinking and the problems they’ve faced to help the SG in delivering this work. There has to be consideration of how SG policy direction aligns with UK and EU
• there can be a role for targeted schemes, such as peatland restoration, but as others have mentioned, implementation needs to align policy and IT, and ensure WTO obligations are adhered to (although they don’t dictate on direct payment mechanisms). Northern Ireland are proposing standalone schemes but this would probably not be beneficial to Scotland and would suggest one scheme for multiple industries where conditionality is a factor
• members were reminded that targets relating to biodiversity are probable in the near future and Scotland’s large area of biodiversity should assist in meeting these, although this may prove problematic when agriculture budgets are set at historical levels (2005) so prioritisation of intended outcomes will be key. It was urged that biodiversity elements be introduced to the new options sooner rather than later and it was agreed that officials explore how to accelerate its introduction
• it’s clear that Government is committed to conditional payments as a means of achieving environmental outcomes, and delivery will be aided through the Framework. Farmers are used to cross-compliance and so gradually increasing, via a menu of options, more tailored, localised carbon and biodiversity conditions which offer some practical advantages would be advised. If those conditions are not met, payment rates decrease accordingly, other than perhaps in areas of disadvantage, but overall capital support based on improvements. These adjustments should be practically attainable now until 2025 ahead of the introduction of climate and biodiversity related payments. Indeed, we are already seeing a cultural shift to carbon justification as part of future lending purposes
• there is still a lot to consider. How do you define activity and is Government paying for improvement or attainment? Considerations have to be given to size of businesses, communications, date and transitional arrangements. On the data, a “capture once, use often” mantra should be employed to reduce the burden on farmers, especially when there may be technology in future to help harness that data in different ways. In terms of self-reporting, monitoring and enforcement, decisions will have to be made on what can be tolerated – and in fairly short order given the small legislative window
• thought must be given on how to cut out deliberate poor performance at the start of the process by those who have been doing stellar work and, as yet, feel they have been unrewarded. That shift in mentality from self-interest to wider interest will be important and in tandem with conditionality being ratcheted up over time
• a Just Transition has to be part of any policy consideration, and it is imperative that SG signal clear and consistent policy intent and commitment

Discussion

One member pointed out that Defra are effectively separating farming from nature and Scotland should use this opportunity to harmonise both and this can be seen through defining exactly what is meant by regenerative agriculture.

Officials added that is it for Government to define baseline measurements, starting with the use of private sector data, and this will be part of the final Framework. There will need to be a natural diversity of different approaches while ensuring adherence to HMRC requirements.

There followed some discussion on soil and its ability to store carbon, with acknowledgement of the complexities. There was broad agreement on Scottish soil quality being of a high standard and our organic matter is improving but that there was no easy path to carbon storage in this way, although there is some optimism that the technological tools will arrive in future.

NFUS

• Martin Kennedy presented NFU Scotland proposals on Future Conditionality. He outlined the need for wholesale industry buy-in and that without it, Scotland is highly unlikely to meet its emissions targets. The industry sees this as a defining moment for agriculture and an opportunity for change. Farmers’ and crofters’ expectations have increased, and therefore the ways in which they are supported must be re-evaluated
• he agreed with previous presenters that climate change and biodiversity are top of the agricultural agenda and so there is an understandable focus on activity, with an acknowledgement that agriculture actively supports communities, rural in particular. He also concurred with members of the board who highlighted the need for emissions-reducing incentives to help the bottom line of farmers and crofters and for there to be clear messaging to help consumers understand the direction of travel
• he posited that support needs to be channelled in the right direction, offering a suite of options according to the size and type of business as well as geographical location, and that are results driven. He outlined what Structure and Transition would look like, with a three tier approach to funding which would cover agri-environment, forestry and peatland:
  • stability - conditional income support reflecting activity, available for every farm and croft, and the first step on the data collection journey
  • conditionality - non-competitive options for productivity, climate and environment available for every farm and croft with recognition for those already carrying out this type of work
  • additionality - designed to be competitive and targeted but capital support must be available
• moving on to Actively Farmed Hectares (AFHs), NFU Scotland propose the same payment per hectare to eligible areas with a rolling average to be continually monitored, and with additional support depending on fragility category. Cropping/arable land and forage land will align with SAF conditions, including the requirement to have a stocking density of 0.8 LUs per hectare
• MK then provided some examples of the transitional figures, including stability moving from 70% to 50% of payments and conditionality moving from 30% to 50% of payments, thereby using the same pot of money, or the same level of support, but adding conditional elements. He re-emphasised that there should be options to suit every farm and croft, incentivising through support and he noted that he was pleased to hear that the Framework for the Agriculture Bill will be flexible in that respect. For example, we must recognise the increased cost of keeping cattle in remote areas (largely LFAs)
• overall, NFU Scotland are keen to reduce the burden on farmers more generally and so favour a system that can utilise existing on-farm data and where there are options for everyone, regardless of where they are on their journey

SE Link*

• on behalf of SE Link, Pete Ritchie outlined his desire for a consensus on the future of agriculture that everyone is happy to get behind. Given the complexities of a new scheme, he opined that it may be too early to finalise anything and that robust co-production between SG officials, farmers and nature representatives needs to continue
• what SE Link do agree on with NFUS is the fundamental need to take people with you when implementing such significant change. However, he argued that area-based payments are a historical legacy and that we need to think more dynamically on nature, climate and food. If we are looking to deliver positive environmental and social outcomes there must be investment in advice towards that transition. More bluntly, SE Link believe that delivering for climate and nature is the core of any scheme and should be considered the cake, not the icing
• he proposed that Tier 3 (previously referred to as Additionality or Elective payments) should actually be at the core of the farming business and that 50% direct payments is a poor use of taxpayers’ money. He commented that he struggled to identify what the NFU Scotland proposals would deliver for nature with an uneven split of money and that the NFUS should be clearer on its policy objectives
• he asked the board to consider what its approach would be if given a blank sheet of paper and access to both public and private funding. At the very least, PR argued we should map what our plans are onto the recently published Vision and ensure it fits in with existing commitments and targets: it cannot be overlooked that 37% of gross GHG emissions relate to land use: a greater figure than transport
• he pointed out that it is likely that left to their own devices, private finance will look to solely maximise their own investment but there is an opportunity for Government and its partners to ensure that delivery of public goods is enforced simultaneously. Indeed, it could be argued that the supply chain is driving change quicker than policy, particularly on emissions reductions
• other ideas that should be seriously considered include whole island plans for farming and food production, sector-wide low methane breeding, appropriate funding channels to local authorities and increased pulse growing. Ultimately, biodiversity and climate must go hand-in-hand
• in summing up, he acknowledged that this process will take time and mistakes will inevitably be made – the climate emergency and other factors will mean the landscape will change in 20 years’ time and so the flexibility that others have mentioned is crucial

Discussion

There was acceptance that while there were detailed points of disagreement, NFU Scotland and SE Link have broadly similar positions and ultimately want the same outcomes. 

Members were in agreement for better comms and engagement whilst being vigilant of the practicalities of funding based on conditionality.

Talks turned to intensification and whether this was purely to improve profitability or whether it could be done in a sustainable way, being mindful of the brittleness of the supply chain and significant policy change that would be required. Those advocating intensification made reference to the import of beef and need for critical mass to support such a sustainable structure.

Members accepted that the move to 50% conditionality was a big shift for many farmers and crofters and acknowledged while more needs to be done, it is vital to give weight to options and allow for that choice/agency. That initial move was likened to “base camp” and moves forward in reaching our climate goals while allowing people to acclimatise and get used to integrating biodiversity and climate considerations into their working lives. A blended approach is essential to safeguard new entrants and the tenant farming sector (who can often be forgotten about).

One member questioned whether fragility markers could be reassessed as part of that flexibility commitment meaning LFAs are appropriately documented. The topic of carbon ownership also needs to be pinned down, particularly as animals move through the chain, and Agriculture (Retained EU Law and Data) (Scotland) Act 2020 allows us to extract such data. Members and officials both stressed the issues around carbon trading, which is already being implemented by the wider industry, and how there could be consequences from not being up to speed with it.

Communications strategy*

Officials provided some context to the new Communications Strategy was provided. It was outlined that the key difficulties in creating this strategy are that (a) the SG and partners are not selling a finalised product but creating it on the way and (b) are trying to make messaging consistent with a large constituent group – both believers and non-believers.

The ways in which farmers and crofters work is going to change significantly and ARIOB, with a credible and trusted industry membership, is Government’s route into that large group. The stakeholder group is large, and has to include RPID colleagues for their operational perspective. 

The Comms Strategy must be multi-layered given the lag between awareness and action – we want industry to know they have choice/agency in how they approach this change. That will be at the heart of a ‘Map and Compass’ engagement approach whereby industry is shown what the future of agriculture in Scotland should look like and we provide them with the tools in order to help get them there.

In addition, Government will provide toolkits for industry partners, including ARIOB, so they can become confident advocates of the new, futureproofed approach, including FAQs, details and graphics that officials will be working on over the next few weeks, primarily as Track 1 of the NTP is rolled out.

Summing up and close

Summing up, Chair noted that there was broad agreement in the board on the direction of travel. It was, therefore, agreed that officials should consider the various perspectives and the detailed points proffered during the day and look to review the draft Framework and develop it further, particularly with regards to conditionality and direct support, and to explore bringing in biodiversity elements as a matter of priority.

In light of the significant range of issues to be followed up on, and length of time until the next substantive meeting (21 April), Chair suggested an hour-long, interim meeting of the ARIOB which would provide updates on the Twin Tracks and Communications. Members welcomed this and requested a Doodle poll be issued due to busy Spring schedules and an action point was taken.

Chair warmly thanked everyone for coming, noting that it had been a hugely co-operative and beneficial day. The next substantive meeting of the board will take place on Thursday 21 April.

* 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.