Report on New Farming Starter Opportunities on Publicly Owned Land

4. Findings

Scale of Opportunity

4.1 The availability of land and farming units for New Entrants to the industry is a subject in itself that has a long history of debate and discussion. Following on from the successes of land being let from the National Forest Estate, it was clear to the Group from early feedback that this programme was more suited to prospective tenants with a degree of existing capital and experience.

4.2 The Group, therefore, concluded that it was important to identify units that were truly rung 1 on the farming ladder and allowed for second incomes to off-set the significant capital often needed. These "rung one" New Entrants are unable to fund a full time, equipped farming unit and may have limited farming experience. New Entrants at the beginning of their careers need opportunities to rationalise or formalise loose agreements or existing areas of land they hold to assist in making the next stage commitments of changing employment, investing further capital or time in their new venture. Given this conclusion, it is vital that, in examining their estates, public bodies should not assume that size, location and land quality are barriers.

4.3 Indeed, feedback to the Group suggests that smaller areas could be more influential in providing the initial opportunities needed. The opportunities should be looked at as a ladder allowing progression from very small beginnings up to larger units and into full scale farming businesses or agribusinesses:

	Potential Area	Equipment Required	Suggested Term
Starter Units	2 - 20 Ha	Limited Equipment	Flexible to suit or 5 years
Intermediate Units	20 - 70 Ha	Some equipment, possible housing	5 -10 years
Full Time Units (or Longer term Units)	70 HA +	Equipped with options for housing	10 years or more depending on unit

What Type of Agreement

4.4 It would appear that crofting is a good example of a first rung on the ladder and, as mentioned previously, the RPID estate consists of 99% croft land. However, under the Crofting Acts, crofting tenure carries succession rights that might restrict the creation of short term starter units. However, the agreed croft re-let policy, operated by RPID, encourages the provision of opportunities for young entrants into crofting. Although difficult, there could still be further opportunities to be explored in the future. Crofting could be particularly important for older career changers, with some capital behind them, to find a route into the industry.

4.5 The adoption of share farming as a farm business structure is suited to many of the challenges the industry currently faces. It was evident from the information provided that there are few opportunities for share farming on the publicly owned estates. However, it is another rung on the farming ladder, where a new entrant, with some capital, can build up experience from the older generation and be prepared to acquire new skills and embrace new technologies.

4.6 Contract farming is a further business structure, increasingly being used by interested parties, involving a management contract between the land owner and the technical operator. Some of these contract farming arrangements are very large, with many on arable land, but there are also a few examples of contract farming being used as genuine early steps on the farming ladder. Normally, contract farming requires a larger amount of capital than some of the other agreements described earlier.

4.7 The Agricultural Holdings (Scotland) Act 2003 brought in Short Limited Duration Tenancies ( SLDTs) and Limited Duration Tenancies ( LDTs) as new types of tenancies. SLDTs allow agricultural land to be let under a lease for a term of not more than five years. LDTs allow agricultural land to be let under lease for a term of not less than ten years. SLDTs and LDTs are the agreements most suited to the letting of land by publicly owned estates to New Entrants.

4.8 Modern Limited Duration Tenancies are being introduced under the Land Reform (Scotland) Act 2016 and will provide a new lease tenure option.

4.9 Different types of agreements will suit different circumstances and flexibility is likely to be key in maximising starter opportunities on publicly owned land, thus increasing the number of people with the right skills, experience and attitudes to move up the farming ladder.

Flexibility

4.10 As suggested above, the Group strongly views flexibility and an ability to respond to changing circumstances as key to supporting those early in their farming career. While this can be challenging it's been proved to be of great value to both the new entrant and the landowner. Both Forest Enterprise Scotland and The Crown Estate have positive examples of where this flexibility has reaped significant benefits to all. Openness and communication on both sides are key.

Success and Failure

4.11 The Group was also acutely aware that in any sector there will be businesses and enterprises that are more successful than others. Where starter units work well and allow for growth, this is an easy "problem" to manage. Where enterprises and ideas are less successful, the new entrant and public landlord will need to work together to plan a way forward that might include a suitable exit strategy. This works twin fold by allowing the enterprise to end with dignity and without significant loss or risk and frees up the unit or land to another operator. It is crucial to accept that, as in any sector, not all start-ups will succeed but if nothing is done in a risk averse management regime, then none can be successful at all.

Selection of Candidates

4.12 The above does draw focus on the importance of appropriately matching candidates with available opportunities. To assist in this, the Group have developed a guide to selection process ( Annex 4) to help decision making. Members of the Group with experience in New Entrant lettings have committed to making themselves available to support this decision making process where bodies feel this would be of benefit.

Barriers to Opportunities

4.13 Discussions highlighted a perception that the guidance contained within the Scottish Public Finance Manual is a potential barrier to public bodies letting New Entrant opportunities due to difficulties in interpreting guidance on property, valuations, value for money and Best Value. The Group believe that well considered and structured opportunities can demonstrate Best Value (as set out in Annex 5) if supported by a robust selection process. Again, if public land holders are having difficulty in developing potential opportunities then members of this Group have agreed to support the development and implementation of these opportunities. In summary, we found that a robust but transparent scoring matrix allied to a consistent cross-public body recruitment process is key to meeting expectations, for example as set out in the Scottish Public Finance Manual.

Land Reform

4.14 Since the conclusion of the Group's discussions, The Land Reform (Scotland) Bill has been given Royal Assent and is now referred to as the Land Reform (Scotland) Act 2016. The Act will:

• encourage and support responsible and diverse land ownership;
• increase transparency of land ownership in Scotland;
• help ensure communities have a say in how land in their area is used;
• help to underpin a thriving tenant farming sector in Scotland; and
• address issues of fairness, equality and social justice connected to the ownership of, access to and use of land in Scotland.

In particular, it aims to:

Part 1 - Require the Scottish Government to publish a statement on land rights and responsibilities and review this every 5 years. The statement will contain a set of principles to guide the development of public policy on the nature and character of land rights in Scotland, to ensure that the full public benefits from land in Scotland are realised.

Part 2 - Establish the Scottish Land Commission.

Part 3 - Increase transparency of landownership through provision or information and publication about controlling interests in land.

Part 4 - Require Ministers to issue guidance for landowners about engaging communities in decisions relating to land.

Part 5 - Introduce a right to buy land to further sustainable development (subject to certain tests).

Part 7 - Give local authorities the power to change the use of inalienable common good land (i.e. land that forms part of the common good and with respect to which a question arises as to the right of the authority to alienate) by applying to such proposed changes of use the same legal process as currently applies to disposals of such common good land, by getting court consent.

Part 10 - Reform agricultural holdings legislation to improve relationships, re-dress imbalances and provide the tools to help the industry begin to move forward. Includes provisions setting up new forms of agricultural tenancies, changing the procedure for rent reviews and expanding assignation and succession provisions.

4.15 Throughout its tenure, the Group were conscious that the land reform legislature passage could potentially impact. We appreciate that the separate parts of the Act will be commenced in due course but equally we are comfortable that our recommendations are sufficiently flexible to absorb future changes.

Data Base

4.16 We also looked at the idea of a data base of farmers offering a succession opportunity and those looking for an entry route. We understand that this is a concept explored through other forums with mixed reviews. Such mixed views were mirrored in responses to the proposal in the mini consultation to create a matching service. In considering the prospect, we became aware of, in particular, a Lantra UK mentoring service that was withdrawn after a short time and on reflection the Group were generally not convinced of the merits of creating such a database.

4.17 The Group did identify that not all available opportunities come to the open market and are able to attract the correct level of publicity and quality of applicants to succeed. To support this objective, the Group plan to use the Scottish Government website to hold, manage and publicise an on-going list of opportunities available and continue to promote these once the work of this short life group has ceased. It is envisaged that this will assist in matching the units to the best available operators and to promote success.

Early Opportunities

4.18 While the timing of this report meant that most land was already let for 2016 - 17, the Group moved to identify a few new opportunities for that period with the prospect that more will become available in 2017-18 as all emerging demand for land becomes clearer. These early opportunities include:

• A selection of 7 grazing units on the National Forest Estate across Scotland and ranging in size from 11 to 560 acres; and
• The potential for a young farmer to take up a 10 year Limited duration Tenancy on the Crown Estate's Fochabers estate in Moray.

4.19 In addition, from discussions with Highlands and Islands Enterprise and Scottish Enterprise, we understand that suitable land may be identified on these Estates.

Scottish Government Support

4.20 As alluded to in the introduction, we are aware that our work is part of a wider package of existing Scottish Government measures employed to assist young farmers and New Entrants since 2007. Measures have included:

• introducing the first Scottish dedicated new entrant scheme under the SRDP 2007-13;
• tasking the Tenant Farming Forum to identify barriers and propose solutions and acting on their recommendations to amend tenancy legislation;
• hosting a New Entrants Summit and establishing an Expert Panel to advise Government on support and assistance for New Entrants, including the position of New Entrants under the next Scotland Rural Development Programme ( SRDP), as part of the Common Agricultural Policy ( CAP) reforms;
• worked with the Expert Panel to deliver £2 million (New Entrants Payment Scheme) of help to new entrant farmers disadvantaged by previous the previous CAP;
• introduced an advisory support programme delivered by SRUC; and
• appointed a group to undertake a legislative review of agricultural holdings legislation.

4.21 More recently, and crucially, the Scottish Government helped ensure that CAP reforms allowed to be eligible for Basic Payment from the start; entitlement values can be topped-up and the SG is able to perform further top-slices to award entitlements to future New Entrants through the National Reserve.

4.22 The new SRDP now also offers specific start-up support for young farmers and other New Entrants and a new advisory service is to be added that will include specific provision for New Entrants.

4.23 During our discussions around government support, the question of a Loans Guarantee Scheme for New Entrants was one that also found favour. But on further investigation, we found that the current Enterprise Finance Guarantee Scheme is already designed to enable banks to lend up to £1.2m to viable small businesses that are unable to provide the security that the bank would otherwise require. The British Business Bank operates the scheme on behalf of the Dept. of Business, Innovation and Skills. However while most business sectors are eligible, agriculture is excluded because of EU State Aid rules. We have found that finance has seldom been a barrier for New Entrants, with Auction Marts, Banks and leasing companies being very sympathetic to their needs. However, as businesses grow, credit can become a problem and a loan guarantee scheme for agriculture would be very helpful.

4.24 We acknowledge the priority placed by the SG on assisting young farmers and New Entrants and those initiatives are an evolving process.