Scotland Rural Development Programme (SRDP) 2014-2020 Stage 2: Final Proposals

Section 2: Wider Context and Governance

Rural Development Strategy

Strategic context for SRDP

26. The Scotland Rural Development Programme will operate under a broad strategic framework agreed by the European Union (EU), termed the EU 2020 Strategy. This outlines a set of key thematic objectives to help focus the strategic interventions enabled through the use of European funds. These thematic objectives are:

EU Thematic Objective and Scottish National Performance Framework (NPF) outcome	Scotland's performance[3]
Research & Development & Innovation. NPF outcome: We are better educated, more skilled and more successful, renowned for our research and innovation	Business expenditure on research and development as a proportion of GDP is substantially lower in Scotland than in the UK or EU 27[4] as a whole. Evidence from Scotland's knowledge exchange index, that measures how well universities disseminate knowledge to the wider economy, has shown an overall increase since 2002/03.
Information and Communication Technology. NPF outcome: We live in a Scotland that is the most attractive place for doing business in Europe.	Over £280m of public funding has been committed to the Scottish Government's Step Change programme, which will ensure that 85% of premises in Scotland can access next generation broadband (NGB) by the end of 2015/16 and 95% by 2017/18. However, even after this substantial investment, significant parts of Scotland will remain unable to access NGB. Indeed, many of Scotland's most rural and remote communities will be amongst the most challenging and expensive areas to connect in Europe. The Scottish Government is committed to ensuring that no part of Scotland is left behind in the digital revolution and recognises that additional and sustained investment will be vital if we are to overcome regional inequalities within Scotland. We therefore see additional public sector funding, including EU funding and UK Government funding as crucial. Broadband take-up in Scotland has risen from 68% in 2012 to 70% in 2013, continuing the upward trend from 2011, though it remains below the UK average of 75%.
Competitiveness NPF outcome: We live in a Scotland that is the most attractive place for doing business in Europe.	Since 2004, the registration rate of businesses (i.e. the business birth rate) in Scotland has consistently been below the UK rate. The business birth rate in rural Scotland is also slightly below the Scottish and UK rates.
Low Carbon NPF outcome: We reduce the local and global environmental impact of our consumption and production.	Scotland has ambitious targets to reduce emissions (by 42% by 2020 and by 80% by 2050 both from the base year 1990). Although good progress has been made, there is a long way to go in meeting these targets. Woodland is an important carbon sink and between 2003 and 2013 new woodland planting has averaged 5,600 hectares/annum. Progress is required to meet Scotland's target of 10,000 hectares/annum for the period 2012 -2020.
Climate Change Adaption NPF outcome: We reduce the local and global environmental impact of our consumption and production.	Agriculture and land use has a crucial role to play in reducing carbon emissions, as it contributes around 20% of total carbon emissions in Scotland. Scottish Government's Climate Change Adaptation Programme is due to be published early in 2014. The programme aims to increase the resilience of Scotland's people, environment and economy to the impacts of a changing climate. In many cases, Scotland already has in place legislation, regulation or policy to protect against those impacts likely to pose the greatest risk. The Adaptation Programme, and associated commitment to public reporting, will complement existing policy and guide an integrated response to climate change.
Environment and Resource Efficiency NPF outcome: We value and enjoy our built and natural environment and protect it and enhance it for future generations.	The quality of Scotland's natural environment is one of its most prized features. Nevertheless, 22% of its designated nature conservation sites remain in unfavourable condition, and over the past five years the national index of farmland birds has consistently declined.
Sustainable Transport NPF outcome: We live in well-designed, sustainable places where we are able to access the amenities and services we need.	Since 2007, there has been a general decline in the percentage of driver journeys perceived to be delayed due to traffic congestion. Meanwhile, the proportion of adults in Scotland usually travelling to work by public or active transport has remained broadly stable at 30% over the past decade. There is a greater reliance on cars in rural areas, where people on average need to travel further to access key services.
Employment NPF outcome: We realise our full economic potential with more and better employment opportunities for our people.	The Scottish employment and unemployment rates have generally tracked the UK rates over the past decade. Compared to the EU 27, the Scottish employment rate has remained significantly higher and the unemployment rate significantly lower over the past decade. While employment and unemployment rates compare favourably in rural Scotland compared to the Scottish average, wages tend to be lower in remote rural areas.
Social Inclusion and Poverty NPF outcome: We have tackled the significant inequalities in Scottish society. NPF outcome: We have strong, resilient and supportive communities where people take responsibility for their own actions and how they affect others	The proportion of individuals living in relative poverty in Scotland has been on a downwards trend over the past decade, despite the impact of the recession. Over the past five years the proportion of individuals living in relative poverty in Scotland has broadly been in line with the UK. In the Scottish Household Survey the following findings are relevant: In 2012, around one-fifth (21%) of adults agreed that they can influence decisions affecting their local area and around a third (33%) said they would like to be more involved in the decisions their council makes. Adults who live in rural areas are less likely to say local services would be convenient to access than those in small towns and urban areas.
Education and Lifelong Learning NPF outcome: Our young people are successful learners, confident individuals, effective contributors and responsible citizens.	The proportion of 18 to 24 year olds who leave school early in Scotland is below the UK but comparable to the EU 27 average. Furthermore, Scotland continues to have a significantly higher proportion of 30 to 34 year olds who have completed tertiary education than the UK and the EU 27. Further information from the National Performance Framework show that since 2001 there has been a steady decrease in the percentage of adults with Scottish Credit and Qualifications Framework Level 4 qualifications or below. The figure has fallen from 16.4% in the 2007 baseline year, to 13.9% in 2011.
Institutional capacity building NPF outcome: Our public services are high quality, continually improving, efficient and responsive to local people's needs.	No obvious data sources available to measure this. However the Mid Term Evaluation of the SRDP set out key areas for improvement which we have taken account of when developing the future SRDP, as explained in the stage 1 consultation.

Table 1: EU 2020 Thematic Objectives

27. These Thematic Objectives will be addressed through a combined approach using the EU funds provided to Scotland, outlined below.

28. Underneath the EU Thematic Objectives sit the EU Rural Development priorities, which direct funding from the European Agricultural Fund for Rural Development (EAFRD) towards the key priorities for rural areas. The investments made through the SRDP must fit into these priorities and the EC will be monitoring all programmes across the EU to ensure that is the case. The EU priorities for Rural Development are:

• Fostering knowledge transfer, co-operation and innovation
• Enhancing competitiveness, promoting innovative technologies and sustainable management of forests
• Promoting food chain organisation & risk management
• Restoring, preserving & enhancing ecosystems
• Promoting resource efficiency & transition to low carbon economy
• Promoting social inclusion, poverty reduction and economic development

29. Scotland does not have to address all six of these priorities if, based on our own assessment of rural Scotland's needs, any do not require government intervention to help achieve the goals of the EU 2020 strategy. However, with both the thematic objectives and Rural Development (RD) priorities, it is clear from the National Performance Framework (NPF)^[5] and rural specific Strengths, Weaknesses, Opportunities, Threats (SWOTs) carried out by the Scottish Government that Scotland can make significant gains in all these areas if appropriate interventions are made.

30. The findings from these SWOTs are summarised in the section on Scotland's priorities and reflect analytical work that has been undertaken by the Scottish Government through the development of the Government Economic Strategy (GES)^[6] and the NPF.

31. It is the GES and the underlying policies that deliver it, including the broad range of policies delivered via the SRDP and other European funds, which translates the overarching EU framework into Scottish-specific solutions to the challenges all of Europe face. To help ensure focus for the work of the Scottish Government a single purpose has been set, which is to make Scotland a more successful country, with opportunities for all to flourish, through increasing sustainable economic growth.

32. The priorities that have been identified for Scotland will be set out further in the Partnership Agreement. This is the key element for utilising the ESIF which is comprised of: EAFRD, European Social Fund (ESF), European Regional Development Fund (ERDF), and European Marine and Fisheries Fund (EMFF), from 2014 - 2020. This is in essence an agreement between the Scottish Government and the EC on the use of the EU funds and sets out how the funds will jointly achieve an impact on the EU 2020 Thematic Objectives.

33. To assist in the development of the Partnership Agreement the EC issued a position paper for the UK in November 2012. This set out three specific challenges which the EC believes the UK and Scotland should address using the ESIF, if there is to be measurable progress against the EU 2020 targets. These are:

• Increasing labour market participation, promoting business competitiveness and research and development investment
• Addressing social exclusion and unemployment
• Developing an environmentally friendly and resource efficient economy

34. The EC's analysis aligns well with the Scottish Government's purpose, the

GES and the NPF; which align with the overall EU 2020 objective of creating a smart, sustainable and inclusive Europe.

35. The Ex Ante Evaluation Guidance for the 2014 - 2020 Rural Development Programme helpfully outlines how the 11 thematic objectives within the Common Strategic Framework (CSF) fit in and relate to the six priorities identified for the Rural Development Programme (see diagram A below).

Diagram A: Link between EU 2020, the CSF and the Rural Development Programme^[7]

Scotland's priorities

36. The Rural Development SWOT analysis undertaken for this programme, and the national one undertaken for development of the Partnership Agreement, set out the key challenges and opportunities that Scotland faces and which will need to be addressed in the future programme.

Strengths

37. The analysis undertaken for the Rural Development SWOT identified the following as key strengths linked to rural Scotland:

• Relatively strong economy - sustained population growth and higher levels of employment
• Key growth sectors (tourism and food & drink)
• Resourceful and resilient businesses and communities.
• Natural capital - extensive semi-natural and High Nature Value (HNV) areas, large quantities of good quality water, extensive carbon stores.
• Cultural, historical and natural assets
• Renowned research institutes
• Good provision for training and learning
• High health status for agricultural livestock and crop plants
• Farming for a Better Climate programme

38. We will seek to build on these strengths in future programmes through the following schemes: agri-environment climate; forestry grant scheme; LEADER; business support; and knowledge transfer and innovation. Further details on the individual schemes, and how they will help address the priorities for the future, are given later in the consultation document.

Weaknesses:

• Uneven population distribution
• Access to physical and virtual infrastructure
• Narrow economic base and lack of growth opportunities
• Access to finance for rural businesses
• Difficult to co-ordinate landscape scale action with multiple participants.
• Low wage for remote rural areas
• Shortage of integrated land management skills development, innovation and research.
• 85% of Scotland's agricultural area is designated as Less Favoured Areas with lack of viable alternative enterprises
• Lack of effective knowledge transfer
• Continuing biodiversity loss on farmed land
• Lack of awareness, support and advice for renewables, energy and waste efficiency

39. These weaknesses will be addressed via: LFASS; forestry grant scheme; agri-environment and climate; support for co-operative action; skills training; knowledge transfer and innovation fund; and advisory services.

Opportunities to:

• Build on 'Scotland' the brand
• Strengthen the performance of Scotland's growth sectors
• Enhance broadband coverage
• Create and maintain vibrant rural communities
• Enhance the social economy
• Utilise Scotland's natural environment and heritage
• Opportunity to support projects to improve economic growth and increase employment opportunities
• Better integrate training/skills across land based sectors and tourism
• Target support for knowledge transfer with stronger linkages to research and technology
• Encourage generation renewal in agriculture and facilitate greater co-operation at a landscape scale
• Support greater collaboration across sectors for added value

40. These opportunities will be taken advantage of via: business support; LEADER; forestry grant scheme; agri-env and climate; skills training; knowledge transfer and innovation; food and drink, advisory services; new entrants support; and budget provision for broadband.

Threats:

• Impact of recession on population and skilled labour
• Impact of recession on production capacity and business competitiveness
• Current economic climate a barrier to investment, research and adoption of new technology
• Increased cost burdens e.g. VAT, fuel costs, Air Passenger Duty
• International competition
• Land Use Planning system may stifle progress
• Varied interests not joined up
• Plant and animal disease outbreaks and risks posed by non-native species
• Loss of public funding can lead to further depletion of natural capital
• Negative impacts of climate change on the environment
• Ageing population

41. These will be mitigated by: LFASS; agri-environment and climate scheme; forestry grant scheme; new entrants support; skills training; knowledge transfer and innovation fund; business support; crofting and small farms support; budget provision for broadband infrastructure; and integration with other funds, local government and other public bodies.

Conclusions from findings of SWOT

42. Based on the analysis, a priority for rural Scotland is to support business viability and enable the agriculture, forestry and agri-food sectors to adapt to market conditions as the European and global economy continues to recover from the economic downturn. Specific priorities include: support for agricultural business operating in remote and fragile areas; a continuation of the growth we have seen in our food and drink sector; support for non-agricultural related businesses; and support that can sustain or grow businesses vital to our rural areas.

43. The SWOT also clearly identifies the benefits for Scotland in protecting and improving the natural environment and the increasing need to address the impact of climate change. Both these areas require significant and on-going support to ensure that we can grow in a sustainable way.

44. There are areas where we can ensure communities can take forward their own agreed priorities, and are equipped with the necessary skills and support to carry them out. This will be essential to address the challenges set out in the SWOT with a particular focus on social inclusion, services delivery, employment and quality of life. The LEADER approach will play an especially important role in this respect.

Delivering our priorities

45. Central to our approach for the environment and climate is a co-ordinated form of support across all EU funds, with projects being effectively assessed by organisations with appropriate expertise, to ensure we can secure maximum value.

46. A targeted approach will be used to deliver land based measures. Rural Scotland has diverse landscapes, cultural and architectural heritage and wildlife, and provides wide-ranging opportunities for enjoyment of the countryside. Some of its communities are located in remote island and mountain settings, and others lay close to major towns and cities.

47. Against this background, the nature of outcomes that can be delivered through the SRDP and the needs of applicants will vary. Therefore, a key feature of the 2014 - 2020 SRDP is to deliver outcomes that are targeted to relevant areas of need (while meeting national and international objectives and obligations). To this end, much of the SRDP will be targeted and administered through a network of expert assessment officers from Scottish Government, Scottish Natural Heritage; and Forestry Commission Scotland, with input from other public bodies as required. Other schemes will be targeted through approaches suitable to the sectors and schemes, for example LEADER will be targeted via the Local Development Strategy process where communities, businesses, third sector and public bodies come together to determine the priorities and actions for their area.

48. Selection criteria will aim to ensure equal treatment of applicants, better use of financial resources, proportionality to the size of the operation and enhance the targeting of measures to be in line with EU and Scotland's priorities for Rural Development.

49. There will be general selection criteria that apply across the board; however, as we are proposing to deliver through individual schemes it will be appropriate to devise additional scheme specific selection criteria as appropriate. Selection criteria we propose to use include:-

• Contribution to national / regional target.
• Targeting criteria to identify applications which will deliver the intended outcome most effectively.
• Long term benefits i.e. will the project deliver outcomes beyond the period of funding.
• Proportionality and value for money - this will be designed to take account of the actual impact of the proposal and the scale of holding / project.
• Co-operation - delivery of projects at a landscape scale are an important priority for the programme and co-operation will be weighted accordingly in the assessment.
• Feasibility - e.g. an assessment of whether the project can be successfully completed within the specified timescales, to the agreed standards, and that payment will be realistically claimed within the defined timescale.
• Membership of quality assurance schemes.

50. Finally, we will improve the support we give to our customers through a range of approaches, to help us all achieve better outcomes from the investments we make.

Complementarity with other funds and policies

51. As stated above, a co-ordinated approach (between the ESIF and other forms of public support) will be essential to ensure that the SRDP plays an integral, but appropriately focused, role in delivering beneficial outcomes for Scotland. This approach will require complementarity with other funding streams and the Partnership Agreement of the UK sets out Scotland's intentions in this area to ensure we secure maximum value from the ESIF.

52. The areas we have identified as being of strong common interest to the various EU funds in Scotland, and for which a joint approach is beneficial, are: business support; skills training; social inclusion/local development and advice. These joint approaches have been developed to ensure that appropriate expertise can provide consistent support to beneficiaries and achieve maximum value for Scotland.

53. Business support will be provided through use of funds from both the SRDP and the ERDF. These funds will be directed towards businesses with growth potential, particularly in key sectors, supporting innovation performance, internationalisation, leadership and digital exploitation. In addition we will also ensure small rural non-agricultural business support (including farm diversification) is available.

54. Formal skills training will be provided through ERDF and delivered in a broad range of approaches. Rural skills (such as modern apprenticeships in the agricultural and forestry sectors) will be delivered as part of this package of support with the exact nature of this to be designed in consultation with professional bodies. In addition to this support for higher-level skills, non-formal skills such as basic IT training can continue to be delivered under the LEADER scheme if Local Development Strategies identify this as a priority. We will also ensure that non-formal vocational skills and training courses will be provided for through the knowledge transfer and innovation fund.

55. The LEADER approach will continue under the SRDP alongside the EMFF. Local Action Groups (LAGs, Fisheries LAGs for EMFF) will agree local priorities through a process of engagement with local people and businesses. The resulting Local Development Strategies will also be informed by the local and national strategic environment as set out in the Partnership Agreement. Guidance will set out the objectives to be achieved through the use of the European funds. To ensure complementarity with ERDF and ESF those preparing Local Development Strategies will work with Community Planning Partnerships during the course of Strategy development. Both parties will develop mechanisms to allow joint working on shared priorities e.g. where a mixture of funds would add value to an initiative.

56. Advisory services is another area of strong common interest to all funds, where joint solutions can be provided. SRDP will seek to broaden and deepen the current provision of advice and support for farmers and land managers in a variety of ways as set out in section 16. To address resource efficiency advice, we are working in partnership with ERDF to explore the potential for funding Green Audits for every farm and rural business in Scotland. ERDF will also continue to invest significant amounts in the business advisory services provided by Business Gateway, reflecting the needs of all businesses in Scotland whether small or large, rural or urban, farmer or shopkeeper.

57. The ESIF will be monitored by a Partnership Agreement Monitoring Committee (PAMC), which will monitor performance against targets and make recommendations to ministers if changes in approach are necessary. Sitting underneath this will be a programme monitoring committee for the SRDP which will consider the performance of the SRDP and make recommendations to the PAMC, under agreed terms of reference, if members agree that the programme needs to be changed to better meet its targets or respond to new or increased challenges. Both bodies will involve key stakeholders from relevant sectors, as at present.

Financial Instruments/Loans

58. In the period 2014 - 2020, Financial Instruments could be particularly relevant for small and medium enterprises (SME) competitiveness. We are exploring the potential for these, as discussed in the stage 1 consultation; however this will be a medium term goal for the SRDP to ensure arrangements are designed effectively. If an appropriate financial instrument is developed we may seek to modify the programme in future years to make provision for this type of funding available.