Evaluation of less favoured area support scheme

2. Background

5. LFAs are defined across the European Union ( EU) in relation to physical disadvantages imposed on agricultural production by, for example, relatively poorer climatic, topographical or soil conditions. Introduced in the mid-1970s, they have evolved over time both in terms of how they are defined and how payments intended to compensate farmers for having to cope with disadvantages are calculated.

6. In particular, the switch in 1999/2000 from headage payments for LFA livestock to area payments for LFA land was a radical change, and one that offered a prologue to the issues to be raised by subsequent wider decoupling of Pillar I support payments. Following prolonged criticism of inconsistency and incoherence of LFA policies across the EU, LFAs are to be replaced by a new spatial designation: ANCs. The scope and rules for ANCs are prescribed by EU regulations and constrain how they can be implemented in Scotland (but there is no obligation to introduce the ANC policy).

7. The current incarnation of Scottish LFA policy - LFASS - has perhaps endured far longer than could have been anticipated at the time of its creation following the switch to decoupled payments from the previous coupled Hill Livestock Compensatory Allowance ( HLCA) system. This reflects delays at the EU-level in the development of ANCs but also understandable domestic preferences for some stability after the prolonged difficulties of devising an area-based payment scheme that was acceptable to a variety of stakeholders, including DG Agriculture and DG Environment.

8. LFASS is widely seen as a key part of the institutional support structure for Scottish agriculture. However, the advent of ANCs is now forcing many of the questions raised by previous debates about LFA policy to be revisited: for example, where lines should fall on a map; how disadvantage should be measured; how payment rates should reflect disadvantage; whether historic stocking densities should feature; how environmental considerations should be addressed; and whether and how transport costs (peripherality) should be included. In turn, this prompts consideration of objectives and the consequences of any redistribution of support that inevitably accompanies policy changes: development of the original LFASS was shaped by constraints on the pace and degree of redistribution between "winners and losers" and similar pressures are still apparent.

9. Although many of the issues encountered in previous LFA reforms may remain the same, the broader policy context has changed in that Pillar I is now not only (mostly) decoupled but is also shifting to a 'flattened' area-based payment (rather than an historic link to previous payments). Moreover, a reduced overall budget, a desire for simplification and the demise of distinct funding axes within Pillar II have all heightened awareness of the dominance of LFA expenditure within it and the need to foster linkages to broader rural development objectives within the overarching RDR.

10. In addition, there is a need for Rural Development Programmes ( RDPs) to sit within European policy priorities (Europe2020: economic growth, social cohesion, climate change etc.) and policies are subjected to increased scrutiny through the Common Monitoring and Evaluation System. Furthermore, the Court of Auditors has examined some RDP policies critically, questioning their value for money. Domestically, the SG National Performance Framework is also relevant.

11. All of this points to the need for a robust, defensible, evidence-informed policy that contributes significantly to the delivery of desired outcomes. Hence the aim of this evaluation exercise was to review LFASS in order to inform development of any subsequent ANC support mechanisms.