Crofting: national development plan

Financial Investments

Scotland's rural economy is on the front line in terms of Brexit and COVID-19 impact, with remote and rural areas likely to be the hardest hit. In response, the Scottish Government has guaranteed Scottish crofters, farmers, foresters, rural businesses and rural communities a period of stability until 2024.

The Scottish Government has made clear its commitment to continuing the current approach to farm and crofting payments during this period. Through the period of 'Stability and Simplicity'^[43] 2021-2024, we will work with crofters, farmers and land managers to ensure that future support is informed by their expertise. At the same time, work is underway to develop future policy for farming and food production which will inform how support is designed and delivered in the future. This transition period allows new approaches to be piloted, and gives us time to properly consider and design new support mechanisms.

We need to act urgently and take action to address the twin crises of climate change and biodiversity loss. So as well as continuing to support businesses to produce food sustainably in the future, we also need to support crofters and farmers to do more to address climate change and enhance the environment. We have set up a range of sectoral groups – for suckler beef, arable, dairy, and hill, upland and crofting – to identify what needs to change and how best to do that.

Our approach to future land use and to agriculture is set out in in the Scottish Government Climate Change Plan update^[44] which also contains specific policy actions. Outcomes will be underpinned by the right science, and will consider practical measures which will help the respective sectors improve efficiency, productivity, sustainability and profitability, whilst reducing emissions at croft, common grazing, farm and estate level.

The first such group, the Suckler Beef Climate Group, has already reported and provides a model for others to follow. A programme board has been established to take forward the suckler beef work quickly. The chairs of all the sector led groups meet regularly in order to ensure coherence across the sector led work. We recognise that the crofting community have a key role to play in contributing to the work of all the groups and to play their part in delivering reduced emissions and improved environment and landscapes.

Longer-term, we are committed to developing rural support to enable, encourage and where appropriate, require, the shift to low carbon, sustainable farming and crofting through emissions reduction, sustainable food production and improving biodiversity. Some of that will involve encouraging and enabling diversification, so more crofters and farmers plant and harvest suitable biomass crops. It will also involve encouraging land use change, with some moving away from food production to high nature value farming, including woodland creation and regeneration, and peatland restoration.

The financial model we envisage will continue direct income support for our crofters and farmers, but in the future will make that support conditional upon meeting the climate change challenge.

Stability and Simplicity

The Scottish Government set out its proposals for future funding for farming and crofting in its June 2018 'Stability and Simplicity' consultation. These proposals set out the approach for future rural policy until 2024, based upon four principles: stability, simplicity, sustainability and security.

The consultation explained that there will be a period of stability, with little change to the current system, until the end of 2020, followed by a transitional period between 2021–2024, where simplifications and improvements will be made, and potential new schemes for longer-term policy will be piloted. This transitional period aligned to the recommendations made by the Agricultural Champions in their report entitled 'A Future Strategy For Scottish Agriculture' published in May 2018. During this transitional period support will continue for crofters in recognition of their role as food producers.

The Agriculture (Retained EU Law and Data) (Scotland) Act 2020 enables the delivery of the proposals set out in the 'Stability and Simplicity' consultation. That legislation also allows us to enable pilots and, where appropriate, make wider changes to other parts of the current Scottish Rural Development Programme.

Convergence and Bew

Under previous CAP reform, the EU set out to redistribute direct payments more equally, based on average Euros per hectare. The intention was that member states receiving less than 90% of the EU average rate would close the gap by one third by 2019. The UK only qualified for such an uplift because of Scotland's extremely low average rate per hectare. Scotland's per hectare rate was only 45% of the EU average, with England, Wales and Northern Ireland all above the 90% threshold set by the European Commission.

Without Scotland, the UK would not have qualified for, or received, an extra £190 million from Europe. Yet despite this, the UK Government distributed it across the UK as part of the overall Pillar 1 CAP funding package, with Scotland only receiving £30 million. The Cabinet Secretary for the Rural Economy and Tourism, Fergus Ewing and his predecessor, Richard Lochhead, received cross-party support from the Scottish Parliament on this matter, and continued to press the Defra Secretaries of State, and HM Treasury at every opportunity into agreeing to holding a review into this funding.

Following pressure from the Scottish Government, the Prime Minister publicly stated in October 2019 that the United Kingdom Government would return the £160 million historic convergence funding to Scotland, so that it could be given to the recipients it was always intended for: Scottish crofters and farmers.

The first tranche of convergence funding, over £88 million, was paid out in early 2020. The money went directly to 17,900 crofters and farmers and was split across an upland uplift, top-up to the Basic Payment Scheme and Voluntary Coupled Support. This funding was focused on maintaining support to those crofting and farming in marginal uplands, hill farms and island areas.

The second tranche of £70 million has also now been paid out, ahead of March 2021, as promised. Scotland has been allocated funding in both 2020/21 and 2021/22 as a result of the Bew Review^[45]. These funds are ring-fenced by Her Majesty's Treasury for crofters, farmers and land managers. Work is ongoing to explore options for how the funding will be deployed.

However, the Bew funding has not been allocated beyond 2022 leaving a shortfall to be addressed. In total, the UK Government has reduced the funding envelope for farming and for the wider rural development programme (Pillars 1 and 2 of CAP) by £170 million by 2025.

Agricultural Transformation Programme

The Agricultural Transformation Programme (ATP) (announced in PfG 2019-2020) was proposed as one of the mechanisms to aid the sector transition to one which is focused on climate change, sustainability, simplicity, profitability, innovation and productivity. In the shorter term, the programme seeks to support a move from the current CAP support regime to a support system post-2024 that will be designed to deliver on Scotland's longer-term needs. This will assist farming and crofting to play its part in contributing towards the delivery of Scotland's climate change ambitions and environmental sustainability.

The Climate Change Plan update, published in December 2020, provides a route map for transforming agriculture, starting in 2020 with piloting and introducing new mechanisms of support for farmers, crofters and land managers to meet Scotland's climate ambitions, as well as delivering wider biodiversity and environmental benefits and continuing food production.

We will take a co-development approach, working with stakeholders and farmer-led groups to secure increased uptake of low emission farming measures through new schemes and approaches, the development of environmental conditionality and enhanced advisory support. Assistance will also be provided for farmers and crofters who wish to retire or leave the industry with dignity by providing an opportunity to consider alternative land uses or alternative agricultural uses.

Under the ATP, a new pilot scheme, the Sustainable Agriculture Capital Grant Scheme (SACGS), has been delivered providing around £17 million in grants to over 3,500 successful applicants for investment in specific items of agricultural equipment that should support delivery of the aim of reducing greenhouse gas emissions. The first year of SACGS will be evaluated to determine whether to continue it in its current form or adapt and augment it to optimise its impact on reducing greenhouse emissions.

The programme will also be further developed to provide additional support for greenhouse gas emission reduction within the crofting and farming sectors, informed by the sector led groups.

We also need to look across the range of land usage in rural and island communities. For example, we also need to plant more trees and restore more peatland. We have the most ambitious targets in the UK and are starting to meet those. Our plan is to plant around 12,000 hectares, or around 25 million trees a year, rising to 18,000 hectares by 2025. We are devoting over the next ten years around £250 million to peatland restoration.

We are also expanding our renewable energy generating capacity with wind, hydro, tidal, biomass, solar, pump storage and anaerobic digestion. Crofters and farmers are also very much involved as business people in some or all of these other land uses, and encouraged to participate through various schemes. We have the land asset in Scotland to enable all this to happen and to be the engine room of climate change action for the UK.

Actions

The Scottish Government will work with crofters through the sector led groups to develop new schemes and approaches to support low carbon sustainable crofting.

New pilots will be co-developed alongside these groups and crofting stakeholders to enable crofting communities to play a greater part in addressing climate change and enhancing biodiversity and the environment.

Less Favoured Area Support Scheme

Agricultural holdings cover 75% of Scotland's total land area, approximately 5.8m hectares. Of this agricultural area, 85% is classed as 'less favoured'. A significant proportion of croft land falls within the less favoured area and therefore receives additional support.

Financial support to those crofting in our most fragile and remote areas is a priority for the Scottish Government. The Less Favoured Area Support Scheme ("LFASS") is an income support scheme which currently supports over 3,000 crofter recipients each year. The principal objective of LFASS is to compensate land managers in less favoured areas for the particular disadvantages that they face, and thereby sustain crofting and farming in these areas. This provides the associated economic, social and environmental benefits that are dependent on continued active farming and land management in these areas.

As at 2020, Scotland is the only part of the UK to offer income support to those farming in constrained areas, and it is important that future support is designed according to Scotland's needs.

Funding is used to:

• Allow crofters and farmers to continue to operate as viable businesses
• Avoid the risk of land abandonment
• Help maintain the countryside by ensuring appropriately managed land use
• Maintain and promote a sustainable farming system

The Hill, Upland and Crofting Group has been asked to consider how LFASS should be developed for the future. The group is expected to report during spring 2021.

Basic Payment Scheme And Greening

The Basic Payment Scheme (BPS) supports active farming and crofting. To qualify for this support, claimants must actively farm their land. Support under the BPS is available to those who are allocated payment entitlements. Applicants can apply for entitlements based on the land they farm and the activity they undertake.

The scheme also delivers environmental and other benefits by requiring claimants to meet certain practices and farm in a sustainable way. Together, these are called 'Agricultural Practices Beneficial for the Climate and the Environment' and are more commonly known as 'Greening'. Greening is paid on top of the BPS.

From 2021, Greening has been simplified with the requirement to undertake Crop Diversification removed. The Permanent Grassland requirement will be retained to provide protection to Scotland's semi-natural and environmentally sensitive grassland, while Ecological Focus Areas will be retained in the short-term subject to a wider review. Scottish Government will work with farmers and crofters to consider if there are practical simple improvements that can enhance the delivery of environmental and climate change objectives between now and 2025.

Agri-Environment Climate Scheme

This scheme currently promotes land management practices which protect and enhance Scotland's natural heritage, improves its water quality, manages flood risk, and mitigates and adapts to climate change. It also helps to improve public access and preserve historic sites.

The Scottish Government has committed £214 million through the Agri-Environment Climate Scheme (AECS) since 2015. We extended contracts that ended in 2020 for a further year, keeping the area of land managed under AECS in 2021 at around 1 million hectares.

The AECS reopened for a targeted range of options in January 2021, to support delivery of a wide range of environmental measures. The support focuses on protected areas, organics, management supporting farmland waders, corn buntings and corncrakes, slurry stores and improving public access. This will help farmers and crofters to undertake important environmental management, and support the work on climate change. It will also promote public wellbeing through providing infrastructure for recreational activities such as walking, cycling and sightseeing.

The 2021 round is likely to ensure a further £41 million between 2022 and 2026 is invested in these priority areas.

Scottish Upland Sheep Support Scheme

This scheme currently provides direct support to help maintain sheep flocks in croft and farm businesses that are reliant on poorer quality rough grazing.

As at 2020, businesses which rely on poor quality rough grazing are defined as those which have:

• 80 per cent or more of their agricultural land in Scotland's Basic Payment Region three, and
• no more than 200 hectares of good quality agricultural land in Scotland's Basic Payment Region one.

The scheme aims to maintain the environmental and social benefits that arise from extensive sheep grazing on the Scottish hills and uplands.

Scottish Suckler Beef Support Scheme

This scheme currently provides direct support to specialist beef producers. The scheme aims to maintain sufficient critical mass in the Scottish beef industry, and the environmental and social benefits that arise from extensive beef suckler herds on the Scottish mainland and islands.

Actions

During the 2021-24 transitional period, support will continue for crofters in recognition of their role as food producers, we will engage with crofters around potential changes to existing support mechanisms so funding begins to work harder to help reduce greenhouse gas emissions and produce food more sustainably.