Agriculture - national test programme: partial business and regulatory impact assessment

Purpose and intended effect

Background

Since the UK left the EU, the majority of agricultural support for farmers, crofters and land managers in Scotland has been delivered through the domestic continuation of schemes previously run under the EU Common Agricultural Policy (CAP) 2014-2020 programme. This is part of the Scottish Government's commitment to maintain a period of stability for farmers, crofters and land managers in the immediate aftermath of the UK exit from the EU, in order to give them as much certainty as possible in terms of their operating environment.

This situation cannot continue indefinitely, however, and so the Scottish Government is developing a robust and coherent long term support framework that will deliver high quality food production, climate mitigation and adaptation, and nature restoration.

As part of this development, a series of industry-led groups were established in 2020 to provide business knowledge, expertise and perspective through a series of reports and recommendations. These 'Farmer Led Groups' covered suckler beef, arable, dairy and pigs as well as the hill, upland farming and crofting sectors. In response to the reports and recommendations of these groups, in 2021 the Scottish Government launched a public consultation on the first steps in the transition to a new long term rural support framework, and also established the Agriculture Reform Implementation Oversight Board (ARIOB) (which is also supported by the Scottish Government's Academic Advisory Panel) and the Agriculture Policy Development Group (APDG) to support the implementation of policy reform.

All of this fed into the creation of the Scottish Government's 'Vision for Agriculture', which was published on 2 March 2022. This sets out the aim to transform how farming and food production is supported in Scotland so that it becomes a global leader in sustainable and regenerative agriculture. The vision is underpinned by the understanding that high quality, nutritious food locally and sustainably produced is key to our wellbeing, that farming, crofting and land management will continue to play an important role in maintaining thriving rural and island communities, and the acknowledgement that farmers, crofters and local communities will need to be supported to ensure they can capitalise on the benefits as we deliver our climate change targets and net zero ambitions, ensuring there is a Just Transition. A new Scottish Agriculture Bill is intended to be brought forward in 2023 in order to deliver on this vision.

Objective

The National Test Programme sits within the wider Scottish and UK context of transitioning support from the previous EU CAP regime to a domestic future rural support framework. The Programme recognises the need for urgency in addressing the climate change and biodiversity crises, as well as providing learning which will inform the further development of the future support framework and the new Scottish Agriculture Bill.

The short-term focus and priority is on those sectors that produce the highest emissions, including livestock production, and so the Programme prioritises them to begin the transformation journey, however the Programme also acknowledges the need for all farming activity to change in the longer term to become low carbon, sustainable and regenerative.

There will be a phased approach to the rollout of the Programme in 2022, making measures available to the current recipients of farm support payments on a voluntary basis. This will support farmers and crofters to better understand the sustainability of their business and policy development will include consideration of the measures that will become a mandatory requirement for accessing support under the long term future framework.

This type of conditionality is expected to apply to various core themes in the future, including:

• Greenhouse gas emissions
• Biodiversity audits
• Soil testing
• Nutrient and forage plans, and
• Animal health and welfare plans

The Programme will be used to explore how best to apply some of these, along with actions ensuring that they deliver towards environmental outcomes and continue to support food production. This will allow for a co-design approach, support a Just Transition, and inform the development of the future support framework.

The Programme will be split into two tracks.

Track One, called 'Preparing for Sustainable Farming', will offer every farmer, crofter and land manager in Scotland support for a Carbon Audit. Once they have completed a Carbon Audit, or if they have already completed one, they can receive support for soil analysis. In addition, as part of a livestock digital data project farmers and crofters with cattle will be provided with access to performance data relating to their herd.

The purpose of this track is to encourage farms to improve their knowledge of their own current environmental performance and efficiency. Support for carrying out these audits and analysis will incentivise businesses to create a baseline of information and understanding in sustainable agriculture. This is a voluntary opportunity open to all farmers, crofters and land managers, to enable their businesses to gain an understanding of their own baseline at an individual farm level.

Track Two, called 'Testing Actions for Sustainable Farming', will include detailed testing of how new conditions or activities could be applied to future support, and to ensure delivery of environmental outcomes in a way that supports sustainable businesses. Once tested as part of the Programme, these can then inform future rural support schemes which will be rolled out nationwide. As part of the livestock digital data project under this track, SAOS (3rd party) will work with a small number of beef farmers, in different geographic areas, to demonstrate the impact of agri-tech and specialist advice and this will help inform future decisions on how advisory services and capital funding can be used to support Scottish beef farming businesses to improve productivity.

The purpose of this track is to develop and test actions that are being considered as conditional elements of future direct support and to determine the data and metrics required to demonstrate they deliver against outcomes. The intention is that this will create a robust understanding of how new conditions or activities could be applied to future support, and ensure delivery of environmental outcomes in a way that supports sustainable businesses.

Rationale for Government intervention

Although the domestic continuation of support schemes from the previous EU CAP has provided farmers, crofters and land managers with some certainty and stability in the post-Brexit environment, it was only ever intended to be in place for a set transition period while a longer term future rural policy framework was developed. This transition period has allowed the Scottish Government to progress the discussions around what this framework for future support should look like. As part of these discussions, it was identified that baselining would be a key element of driving emissions reduction and environmental, technical and economic progress on Scottish farms and crofts. The twin tracks of the National Test Programme have been developed to help deliver this, by encouraging farmers and crofters to begin establishing their own baseline in advance of the increasing conditionality requirements that will form part of the longer term support framework. This will in turn inform the development of the requirements and actions that the Scottish Government will set regarding this conditionality.

The Programme is therefore aimed at the following outcomes of Scotland's National Performance Framework, as it supports the ongoing shift in rural policy towards being more environmentally sustainable and accountable and actively driving towards a greener economy:

• That people have a globally competitive, entrepreneurial, inclusive and sustainable economy.
• That people value, enjoy, protect and enhance their environment.

A key justification for government intervention is in its ability to guide markets towards achieving more socially optimal outcomes, in the presence of externalities (side effects). In the case of agriculture, one such externality would be its impact on the environment. The environment can be thought of as a public good, one which benefits all of society and would otherwise be underprovided for by the market alone. This is due to the tendency for individuals (e.g. farmers, consumers, etc.) to place a higher weight on their own 'private' costs and benefits than they do on the wider (social) costs and benefits of their actions.

The policy specific rationale underpinning this Programme is therefore that it will:

• Combat the negative externalities associated with current farming practices, such as environmental degradation and air pollution.
• Support the farming sector to transition to a system where positive environmental actions are rewarded, by creating the right incentive mechanisms as current systems have distorted incentives.
• Support the farming sector to undertake actions which will deliver greater positive externalities for the population of Scotland (such as healthier animals, improved biodiversity, reduced greenhouse gas emissions, etc.).
• Be used as a tool to address information failure in the industry, by supporting farmers, crofters and land managers with trustworthy information and tools to help them succeed.