CONSULTATION ON THE ALLOCATION OF SCOTTISH FISH QUOTAS

Chapter 2: The Scottish Government's policy objectives

2.1 This chapter explains the Scottish Government's policy objectives in relation to the allocation of fish quotas, and discusses connected issues.

Fishing and the Government's economic strategy

2.2 At the highest level, the Government has two objectives in allocating fish quotas:

• To ensure that Scotland continues to meet its international obligations within the EU's Common Fisheries Policy and in this way ensures a sustainable exploitation of natural resources shared by the Member States of the European Union, and with other states involved in fisheries in which Scottish fishermen participate; and,
• To provide a regulatory and management environment in which the fish catching sector and associated onshore enterprises can make an increasing contribution to the Scottish Government's overall purpose, which is to create a more successful country, with opportunities for all of Scotland to flourish, through increasing sustainable economic growth.

2.3 The Scottish Government's purpose was explained in the updated Government Economic Strategy, which was published in September 2011. You can read the Government Economic Strategy here:

http://www.scotland.gov.uk/Publications/2011/09/13091128/0

2.4 In its updated economic strategy, the Government highlighted that, in pursuing economic growth, it wished to share the benefits of growth by encouraging economic activity and investment across all of Scotland's communities and to secure a high quality environment and a sustainable legacy for future generations. The Government emphasised that it wishes economic growth in Scotland to be characterised by solidarity (reducing inequalities across all individuals), cohesion (reducing the disparity between the regions of Scotland) and sustainability (enhancing the environment and reducing emissions).

2.5 Fish stocks are a national resource, the potential benefits of which are so-called resource rents; returns to the resource user in excess of the economic costs of harvest. But, as is clear from the description of its economic strategy above, generating financial profit is not in itself sufficient to achieve the Government's Purpose. The distribution of the benefits is also important: as it is in relation to all of Scotland's natural resources. The Government is committed to securing the economic future of coastal communities and to improving the wellbeing of people throughout Scotland. While it is desirable for this industry, as for others, that its future shape be determined in the first place by competition and markets, it will not be acceptable to the Government for fishing activity to be consolidated into a small handful of ports nor for the profits achieved through Scottish fisheries to be enjoyed in places distant from fishing communities.

The 2008 Scottish Government consultation

2.6 This is not the first public consultation that the Scottish Government has published about the future of fishing in Scotland. In May 2008, the Government issued a consultation paper on quota management (and licensing), and in February 2009 an interim outcome document from the consultation was published. It was not then possible for the Scottish Government to implement changes connected to quota because there was no agreement between the UK Administrations about the scope that existed for devolved administrations to adapt UK quota management arrangements. The position has changed now because of the 2012 Concordat, which provides a system of quota allocation and devolved flexibility agreed among the UK countries.

2.7 The 2008 paper, Safeguarding our Fishing Rights, proposed five goals for the future success of fishing in Scotland:

• To ensure that Scottish fishing communities retain their fishing rights, now and in the future, and that fishing rights remain a Scottish national asset;
• To promote a shared approach where all concerned are involved in managing Scottish quotas;
• To encourage quotas to be held by those who can fish them, and to prevent them from becoming a speculative asset;
• To provide a stable regulatory environment for the Scottish fishing fleet, for those investing in its future, and for fishing communities; and,
• To encourage the growth of businesses and the regeneration of the fleet, and to keep down the cost of quotas.

2.8 The Government maintains these goals now. We view them as positive objectives for the Government's role in the allocation of fish quotas which, if achieved, will better equip this sector of the economy to make its contribution to the Government's overall purpose of sustainable economic growth characterised by solidarity, cohesion and sustainability. This document considers and invites views on the extent to which the options described can pursue the Government's objectives effectively.

Smaller family and local businesses

2.9 The Government is focussed in particular in this consultation on the power of active fishermen to shape their future in the industry and to consider whether and how it might be possible to sustain the traditions of smaller family and local fish catching businesses that are valued so widely in fishing communities. The Scottish Fishermen's Federation has referred to "the unique nature of the Scottish industry", with its models of "local ownership, with the business in the hands of skippers, families or relatively small consortia". As the SFF highlighted "this structure confers a number of benefits, including strong local territorial connections, an extra determination to survive challenges and a very personal requirement to succeed".

2.10 We are concerned that the systems of quota allocation and management that have been in place since 1999 may now be operating in ways that are making it increasingly difficult to sustain these traditions. We are concerned that the industry is approaching and in time will pass a tipping point after which consolidation accelerates and smaller family and local businesses become marginalised.

2.11 In offering these observations the Government wishes in no way to detract from the very positive and valued contribution that larger fishing concerns and companies make to the economy and to local communities. Fishing, like all parts of the economy, has changed and will continue to change. We welcome that. We want to see a fishing industry that is vibrant, dynamic and competitive. There are many successful companies investing now in coastal communities, providing a range of excellent employment opportunities, supplying and exporting high quality Scottish products.

2.12 The Government's intention in raising this issue however is to consider how we might support smaller family and local businesses so that they can continue to thrive and play a part in a successful, innovative and forward looking industry where there is a diversity of successful operating models.

Considering new bases and systems for allocations

2.13 This consultation document includes, as well as adjustments to the existing system, consideration of whether, for policy objectives to be pursued effectively, it is necessary to change the basis or system of quota allocation. This is different to the approach that we took in the 2008 consultation, when the Government proposed from the outset to retain the FQA system as the principal method by which the quotas available to Scotland would be allocated. It then also proposed changes to quota management arrangements designed to make quota more accessible to the active industry.

2.14 Now, we wish to have an open debate about whether the Government's policy objectives can indeed be pursued effectively by improvement to the present system; or, whether it would be more in the long term national interest to undertake a fundamental reform. Such reform might conceivably apply across all quota stocks, or new bases or systems for allocation might instead apply to particular groups of stocks.

2.15 The Government accepts (as was highlighted in the 2008 document) that a debate in these terms does bring with it a level of uncertainty. But we believe that the future of the fishing industry in Scotland is an issue of national importance: it is vital that a policy is in place that supports its long term success. There is also considerable international precedence for this. A number of countries have undertaken reviews of their quota management systems and have conducted public examinations of how they might be reformed in order to promote diverse policy objectives. Many of these reviews have focussed on the steps that could be taken to safeguard the primacy of fishermen within fishing industries and also how communities traditionally involved with fishing might continue to enjoy the socio-economic benefits of continuing activity.

Options that are not considered

2.16 The consultation paper does not consider the option of establishing in Scotland a system of Individual Transferable Quotas ( ITQs). Nor does it consider the option of separating the system of quota allocation from fishing vessel licences. The Government rules out both of these options in principle because we consider that they are incompatible with our policy objectives. A system of ITQs involves the effective privatisation of fishing quotas and removing the current association of fish quota to licences increases the scope for persons without any contemporary or positive link to fishing to hold quota. Neither of these outcomes are acceptable to the Scottish Government.

The relevance of the landing obligation

2.17 A new Common Fisheries Policy ( CFP) regulation is now in force. It commits the EU Member States to a harvesting of sea fish according to the principle of Maximum Sustainable Yield ( MSY) and to the progressive implementation of a landing obligation in relation to sea fish subject to quotas.

2.18 The Scottish Government is working cooperatively with the fishing industry and with others with an interest to ensure the effective implementation of the new regulation. Preparatory steps are being taken in a number of areas, including the further development of measures that can help to reduce unwanted catches. Active consideration is also being given to how it might be most sensible to utilise flexibilities that exist in the new regulation.

2.19 In these preparations, and so as to be clear about the purposes of this consultation, however, it is not the Government's intention to undertake a re-allocation of quota in a way designed to anticipate the catches that vessels will be obliged to land when the landing obligation is in effect. We think it highly unlikely that it would be possible for Government or any other planning body to anticipate with any degree of accuracy the catches that might be taken across the fleets. We prefer instead to focus effort on working with affected fishermen to reduce unwanted catches; to seek to ensure that the maximum amount of quota available nationally and internationally can be sourced for Scottish vessels; and, to consider how businesses might evolve so that they can operate successfully when the landing obligation comes fully into effect.

2.20 On the other hand, we do consider that the prospect of the landing obligation is an additional reason to consult now about the allocation of fish quota. The successful implementation of the obligation will involve very significant challenges, and could well increase demand for quota for species of fish that are abundant or in relation to which Scotland has a relatively small allocation. This involves of course a risk that the cost of leasing such quota will increase. In the light of this, the Government considers it important that we consider now what if any steps can be taken to offer active fishermen better, more affordable, access to quota, so that they can be as well positioned as is possible to manage their businesses after the implementation of the landing obligation.

The referendum on Scotland's future

2.21 The options for change described in this consultation are each designed to be capable of implementation within the powers available to the Scottish Government under the Concordat. These powers are of course limited and exist within the present UK constitutional framework. These limitations mean that the Scottish Government cannot rule out the possibility of our fish quotas being transferred out of Scotland, to another part of the UK, even if Scotland moves to a different basis for quota allocation from the rest of the UK (but continues not to be an EU Member State in its own right). The table below shows that the percentage of UK FQA units held on Scottish licences has, for some quota stocks, declined in recent years. Since 2004, the Scottish share of UK FQA units for whitefish species of main commercial interest to Scotland has reduced by 10%. Nephrops by 6%. Pelagic by 2%.

	Percentage of UK FQA units held on Scottish licences
	2004	2006	2008	2010	2012	2013	2014
Whitefish [1]	77	74	76	70	68	67	67
Nephrops [2]	80	82	80	77	76	74	74
Pelagic [3]	77	77	76	76	73	75	75

2.22 The present constitutional arrangements also allow the UK Government to top-slice our quotas, as has been done annually in recent years with respect to North Sea Whiting and Western Mackerel.

2.23 The Scottish Government believes that only independence can assure that our fishing rights can remain a Scottish national asset and thus help to safeguard the future of Scotland's fishing communities. Following a vote for independence in the referendum on 18 September, the Scottish Government will enter into negotiations with the rest of the UK and with the EU institutions to fully define our fishing rights and other key issues, including our share of UK quotas. We believe it will be in the interests of both Scotland and the rest of the UK to agree an appropriate and fair set of allocations so that the normal fishing practices of each state can continue unaffected.

2.24 As an independent Member State within the EU Scotland will also, for the first time, have the ability to protect its own interests internationally and build constructive alliances with others through complete and direct access to EU institutions and votes in the EU Council. Scotland will be negotiating as one of the foremost and most respected fishing nations in Europe.

2.25 As an independent Member State within the EU, Scotland will also continue to play an active role in international quota swaps, which makes an important contribution to our ability to access an increased supply of quota for target stocks. Swaps could of course include arrangements with the rest of the UK. Equally, there is no barrier in present UK and Scottish quota management rules that would prevent POs and others in Scotland from continuing to lease quota from other Member States, including from the rest of the UK. We think it reasonable to expect that leasing arrangements that allow fishers in the rest of the UK to gain financially from quota allocations that they do not intend to fish would continue were Scotland a Member State within the EU.