Agriculture and Rural Development Stakeholder Group minutes: January 2018

Attendees and apologies

Attendees:

• Kirsten Beddows - (Chair) CAP, GM and Agricultural Climate Change, Scottish Government
• Adam Smith - Game and Wildlife Conservation Trust
• Andrew Wright - Institute of Auctioneers and Appraisers in Scotland
• Anne Gray - Scottish Land and Estates
• Claudia Rowse - Scottish Natural Heritage
• Dave Miller - James Hutton Institute
• Debs Roberts - Scottish Organic Producers Association
• George Milne - National Sheep Association
• John Fletcher - Deer Farmers
• John Kinnaird - Agricultural Champion
• John Raven - Historic Environment Scotland
• Julian Pace - Scottish Enterprise
• Kevin Mills - Agricultural Industries Consortium
• Kirk Hunter - Dairy UK
• Martin Morgan - Scottish Association of Meat Wholesalers
• Neil McCorkindale - Scottish Beef Association
• Stuart Ashworth - Quality Meat Scotland
• Vicki Swales - Royal Society for the Protection of Birds and SE LINK
• Amanda Fox - Rural Economy and Communities Division, SG
• Andrew Carton - Deputy Head of Finance for ARE, SG
• David Barnes - National Adviser on Agriculture Policy, SG
• Ewen Scott - CAP, GM and Agricultural Climate Change, SG
• Helen Duncan - RESAS, SG
• Helen Stanley - CAP, GM and Agricultural Climate Change, SG
• Ian Davidson - Head of Agriculture and Rural Division, SG
• Jo Storer - EU Hub, SG
• John Kerr - SASA, SG
• Neil Watt - Head of European Policy and Communications, SG

Apologies (organisations not represented at meeting):

• Alastair Nicolson - HIENT
• Alice de Soer - CAAV
• Alison Milne - STFA
• Brendan Callaghan - Forestry Commission
• Bruce McConachie - Cairngorms National Park
• Caroline Drummond - LEAF
• Celia Nyssens - Nourish Scotland
• Pete Ritchie - Nourish Scotland
• David Lawrie - Young Farmers
• Drew Ratter - Highlands and Islands Agricultural Support Group
• Elspeth MacDonald - FSS
• Jamie Farquhar - CONFOR
• Michael Downey - Committee of Scottish Bankers
• Patrick Krause - SCF
• Serafin Pazoz-Vidal - Cosla
• Steven Thomson - SRUC

In addition a number of SG officials were unable to attend including:

• Andrew Watson - RPID
• Annabel Turpie - RPID
• Rachel Smith - secretariat

Items and actions

1. Welcome and introductions

1.1 KB chaired the meeting as Ian Davidson was unable to attend until later. She welcomed everyone and introduced Helen Duncan who had joined RESAS, the new Deputy Head of ARE Finance, Andrew Carton and Amanda Fox from Rural Economy and Communities Division. There followed round table introductions. Unfortunately RPID colleagues had sent their apologies as no one was able to attend the meeting.

2. Minutes and actions of the last meeting

2.1 Minutes of the last meeting (7 Nov) had been circulated. There were no further comments and so these would be posted on the ARD SHG website.

2.2 HS referred to the action at para 7.5 of the last minutes regarding an update on the rural infrastructure policy item. AF provided an update which had been circulated to the group and attended the start of the meeting to answer any questions. She reiterated that their work was not about infrastructure as we know it (i.e. transport links, connectivity etc). The PfG commitment focuses on the south of Scotland and concerns collaborative working between public agencies and the private sector to progress economic development projects. A South of Scotland Economic Agency is being set up and interim arrangements are being taken forward through the South of Scotland Economic Partnership.

2.3 There was further discussion about the Enterprise and Skills Review and a question about where the future of wider structural funds debate is taking place. AF made the group aware that National Council of Rural Advisers has been tasked to develop future policy and support mechanisms to ensure a thriving rural economy and is currently planning to engage with stakeholders to seek their views. KB said we would keep the ARD SHG appraised of this on-going work. ACTION: AF to send HS relevant links to circulate e.g. membership of SoSEP, Enterprise and Skills Review and email address for the National Council of Rural Advisers. (Action Completed)

2.4 There weren’t many other outstanding actions:

• Para 3.2 (bullet 1) – RPID to provide update on cross-border cases including timeline for when these should be paid. Action completed 7/11. However, there was an additional action for Alice de Soer to email HS with a further question on the cross-border transfer. HS hadn’t heard from AdeS and so would chase this up. (Action completed)

• Para 2.2 (last bullet) – Anne Gray asked SG to provide a breakdown of numbers of those on the negative list that had sought access to BPS through the re-entry criteria and how many had succeeded. HS provided the following figures:

  • 19 businesses identified as having negative list activities
  • 4 failed to be re-admitted
  • 15 passed through one or more of the re-admission criteria

In a follow up question AG asked why the 4 had failed to be re-admitted. Taken as an ACTION for the next meeting. (Action Completed)

• Para 5.1 – Pillar 1: Paul Neison to provide an update on the processing of entitlement transfers and when people can expect to receive this. (Action Completed)

3. Pillar 1 and Pillar 2 updates

3.1 In the absence of a representative from RPID, KB relayed the Pillar 1 and 2 figures that had been provided – see link below.

http://www.parliament.scot/S5Rural/REC-2016_Basic_Payments_Scheme_Payments-monthly_update-_15_December.pdf

3.2 KB said she had no further info about P1 but if there were any questions she would take them away as an action. Regarding a question about early LFASS payments to help with the additional costs being faced after the wet weather, KB said RPID and the Weather Panel were looking at this.

3.3 P2 update – ES. On 14 December Cab Sec had announced his decision to pay 100% LFASS payments in 2018 rather than 80% parachute payments. Change is due to the Omnibus regulation and will require a change to the SSI for 2018.

3.4 Modification 4 to the SRDP had been sent to the Commission – waiting to hear from Commission if they accept the modification. Only small amendments, such as removing ECAF from the programme, in keeping with Ministers’ decision, and strengthening the collaborative aspects of AECS.

3.5 Draft budget announced by Ministers on 14 December - minimal impact on SRDP programme budget mainly due to changes to the co-finance rate earlier in 2017.

3.6 Latest AECS round opened on 17 Jan and closes on 13 April. A later closure date of 31 May applies to collaborative projects which involve 5 or more businesses. Success rate for AECS is around 80%. We are issuing contracts from the 2017 application round which committed £47.7 million to 801 projects over the next five years. AECS has committed more than £100 million to 2,090 businesses since its launch in 2014.

3.7 LEADER – as of 9 Jan 2018, almost 900 project applications received. Of these, 411 have been awarded around £24.5 million towards total investment of around £61.5 million. The current LEADER programme is leveraging in 251% of funding for every £1 of SG/EU funding. A further 29 projects, valued around £1.8 million are at final decision stage, i.e. awaiting LAG Committee decision, and 309 applications at various development stages.

3.8 Future of SRDP – we will be preparing information for Ministers on handling the SRDP until it is due to close so that we can plan in advance of Brexit (we have certainty for contracts up to the point of exit). Following the next RDOC meeting in April we will share an updated scheme progress table with ARD SHG. We aim to do this twice a year after each RDOC meeting.

3.9 Omnibus Reg – KB. Part of Hogan’s simplification agenda. Makes changes to main agri/rural development regs. CAP elements of the Omnibus Reg were published in December. Ran through main changes in P1. Some are mandatory and some are optional. Latter can be split into some which are quite simple, some which aren’t applicable and some where we need to see the delegated acts to determine how useful or otherwise they are.

3.10 Mandatory changes include length of payment period for young farmers (YF). Going forward, the 5 year time limit no longer only applies from date of application but can be backdated. There is a derogation that would allow member states to also apply this retrospectively. However, we would need a Ministerial decision on whether or not we use this as it would have a budgetary impact. Will be putting up advice to Cab Sec. In response to a question about SG discretion, KB clarified that mandatory element affects YF payments going forward but the derogation is about whether we adopt the change historically.

3.11 Another mandatory change relates to the definition of fallow land. From 2018 if fallow land is not included in a crop rotation, in 2023 it becomes permanent grass. On Greening there is a change to crop diversification exemptions to include leguminous crops. Triticum spelta is added to list of crops allowed for crop diversification. The 30ha arable limit for EFA is removed. The advice from RPID is that these don’t affect Scotland to any great extent.

3.12 Optional changes: Active farmer – MS can stop applying negative list. Might want to consider this as it has limited impact and there already are active farming requirements. Group seemed to feel the negative list was unnecessary. We will ask Cab Sec for views. Too late to change this year’s SAF but, if the decision is to drop the negative list, we will not apply it. (Note: decision has now been taken to drop the negative list)

3.13 Have already mentioned parachute payments delayed till 2019. Welcome for 2018. Ability to review VCS annually – have to notify a year in advance. Might be of interest. Can take as agenda item for future if more detailed discussion would be helpful. (See Action for KB below)

3.14 There was a call for more discussion papers ahead of these meetings as it was felt it would make for a more productive meeting. On VCS, JF expressed dissatisfaction that there were no coupled payments for deer farming. Question about whether existing schemes are benefiting livestock sector. DB said we don’t know what would have happened if we didn’t provide that support. Spirit of stabilisation plan is to avoid change if it impacts on getting systems on to a firmer footing. While there are some questions about the detail, likelihood is that VCS schemes will continue for the time being. If anyone thought VCS schemes are having detrimental effect, they were asked to bring that to SG to examine.

3.15 Option to change how we reduce payments through degressivity i.e. can increase the percentage reduction. There is another window of opportunity to change Pillar to Pillar flexibility – again, can only increase the percentage of funds transferred from Pillar 1 to Pillar 2. There are some optional changes around Greening – can bring paper to future meeting. Need to see how applicable they are for Scotland. There was a discussion around potential changes to the definition of permanent grass (any change to which needs to be notified this March). RPID’s initial view was that it would be unwise to change because of the knock-on effects on Greening etc. Also issues around delivery, monitoring and verification. Others thought if we were following the CAP for a few years it would make sense to make some changes. ACTION – KB to circulate information about the potential change to permanent grassland, due to the short timescale, and draft discussion paper on optional aspects of Omnibus Reg. (Action Completed)

4. Update on Brexit and work of Agriculture Champions

4.1 DB said the point about papers is relevant. A key doc is Scotland’s Place in Europe that had been circulated. Neil Watt would be talking about that later.

4.2 EU Withdrawal Bill issues were not resolved. SG considers this a power grab. DAs not reassured by UK Ministers’ assurances. Assume any amendments to the Bill will come at Lords stage as the Bill has now progressed to the Lords.

4.3 CAP reform – Since the Commission Communication came out in Nov there had been discussions at Dec Agriculture and Fisheries Council with another one due at Jan Council. Long list of technical questions so likely to be some time before we see much progress. Most Member States saying CAP is too rigid and needs more flexibility. At same time, MS want uniformity or they complain that it’s losing commonality. The other key issue will be the CAP budget. Multiannual Financial Framework (MFF) proposals are expected in the Spring.

4.4 ID commented that French President, Macron, is starting to talk down the budget which would be a big switch of position by France. Germany also going through political turmoil and is a big contributor to the CAP. SG asking UK not to disengage from the process. Current MFF comes to an end at end of 2020. New CAP period should come in at start of 2021 but there was a transition year last time which is likely to happen again. Also likely RD programmes will roll over for a year. Possible that Brexit might make new CAP/budget start even later.

4.5 EU/UK negotiations – had European Summit since last meeting. European side said sufficient progress to move to stage 2. Also talked about transition. Key doc had been circulated but would re-circulate – ACTION – Jo Storer (Action Completed)

4.6 Milestones: broad structure of divorce settlement by March and broad shape of delivery by October. Transition period – we understand it says UK will leave EU in March 2019 but behave as if it is a MS until end 2020 i.e. still inside EU single market etc. If 2020 scheme year is within transition period, we have been asking UKG what this mean for CAP payments (which would fall in 2021). Defra says this concerns the big picture negotiations and can’t answer at present. We hope this may be clear by March but unlikely.

4.7 UK-wide frameworks: as mentioned at last meeting, we’d had a breakthrough in that terms of engagement had been agreed on framework discussions. Decided to test that out and farm support was included. Some work carried out on what will replace CAP. Discussions on other agri issues just gearing up. Linked to EU Withdrawal Bill so quite sensitive.

4.8 In farm support area – identified WTO compliance as area where some sort of UK-wide framework will be required. Also, necessary for administrations to collectively ensure WTO rules are complied with. Risk of that not happening is quite low. Brought in WTO expert (George Burgess). Number of other areas where ability to have UK-wide systems seems to make sense - quality standards, market intervention etc. SG argues it’s not essential to have UK-wide systems but might be desirable.

4.9 For everything else, e.g. RD programmes etc, DAs should be free to make own decisions. Mutual benefit in sharing best practice, perhaps some joint programmes. Getting mixed messages from UKG e.g. the Secretary of State at the Scotland Office and Mr Gove say DAs will be free to make own decisions. However, for example, that’s not what is being implied in UK’s 25 year environment plan. In terms of policy content we’re considering what needs to be in legislation, what can be dealt with in other ways and how to replace EU’s decision-making (Council of Ministers). Not complacent – still the threat of UK-wide rules that don’t allow us to do things in Scotland’s best interest, albeit in the background.

4.10 There followed a discussion about the need, or otherwise, for harmonised standards. DB said some harmonisation might be welcome but want DAs to have ability to set own. Also some standards have market implications – more complicated if different standards apply north and south of border. No decisions taken on this and all would be subject to Ministerial approval.

4.11 On budgets, DB said DAs have asked for some form of MFF certainty about money. Defra says it’s up to Treasury. UK/DA finance departments are due to meet up. There was a point raised about income forgone, wanting a different framework going forward and whether SG was having these discussions. DB said the chances of changing WTO text on this is nil but SG was looking at ways of making it less of a constraint in future.

4.12 Some have argued that to continue with VCS after EU exit would be market distorting but SG view is that no it’s different from bailing out a steel plant in Wales. Also, unfair to argue that what we choose to do with our share of the budget is distorting when you look at how large a share others get compared to Scotland.

4.13 Mr Gove’s Oxford Farming Conference speech – media coverage suggested funding was guaranteed for 5 years at current levels but that’s not what he said. DB urged group to read Mr Gove’s speech. He talked about capping biggest payments to free up some money. He suggested funding would be available until 2022/23 but so far as we know there is no guarantee from Treasury to back this up. We’re looking for more robust guarantees that aren’t limited by the lifetime of the current government.

4.14 Policy development in Scotland. Deadline passed for input to the Agriculture Champions interim paper. DB thanked those who’d responded. Still working with Champions on how much detail goes into the next report. Griggs group on Greening - second report came out at end of 2017. Will send link to that when it’s in public domain. ACTION - Jo Storer. (Action Completed)

4.15 On engagement with Champions and SG – will look at case for workshops as well as meetings that are already take place. Would welcome thoughts. Regarding timing of the Ag Champion’s report, DB said need to allow sufficient time to do a thorough job. Ultimately will be for Ministers to decide on strategy for Scotland.

5. Scotland’s Place in Europe publication

5.1 NW – Directorate for External Affairs spoke about the document Scotland’s Place in Europe: People, Jobs and Investment – a link had been circulated to the group earlier. He said it was an important time - waiting to see what type of deal will emerge. Key points in doc: SG’s clear position to remain in EU or, failing that, the least worst options. Trying to fill vacuum where not a lot of evidence. Looks at evidence of 3 scenarios, looks at opportunities for remaining in single market. Highlights stark figures of leaving EU – especially a hard Brexit.

5.2 He talked about how his work fits in wider context – works closely with constitution, finance, trade, Brexit hubs. Two teams – EU policy (on-going EU business) and EU communications team (promote SG position). Aware agriculture is massively affected by Brexit. Team has role in myths busting. He asked the Group to get in touch if there are any upcoming events they can get involved in.

6. AOB and date of next meeting

6.1 ID said he had decided to postpone an AOB on prescripted schemes as he would prefer to issue a paper for discussion another time.

6.2 We have the next 3 ARD SHG meetings arranged for 20 March, 24 May and 17 July. Meeting requests have been issued.