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

Section 4: Budget For SRDP 2014 - 2020

Introduction

68. The Scottish Government has made substantial investments in its rural development programme over a number of years, demonstrating its commitment to supporting the rural economy, but also our environment. This investment has made a real difference to businesses and communities across rural Scotland.

69. Over the 2014 - 2020 period the Scottish Government is keen to build on this investment to ensure that the next programme addresses the specific needs facing Scotland, as identified in our SWOT analysis. However this will be achieved within a backdrop of not only reduced funding from the EU, but also a continued decline in the Scottish Government's budget due to the spending decisions taken by the UK Government.

70. These funding pressures mean that our programme needs to be more focused on the key priorities facing Scotland and that support is targeted to areas where it will have the biggest impact.

71. These proposals have factored in the vital and substantial support that DP will provide for the agriculture sector and also the rural communities where these farms are based. Furthermore, the EU requirement that 30% of the DP budget needs to be targeted on Greening, means that a significant investment in Scotland's agri- environment will come through both DP and SRDP over the next programme.

72. The balance of funding across the programme reflects what can be achieved from each part of the programme. For example, experience from the current programme has highlighted that in some areas substantial improvements can be made from relatively modest investments.

73. Based on the priorities outlined in our SWOT, and considering the reduced budget Scotland has been awarded from the EU and UK, we are proposing to allocate funds where we believe highest value will be achieved for rural Scotland. This does not address all of our priorities. That was impossible given the decisions taken on our behalf by the UK Government during budget negotiations. However it does address the key challenges we as a nation face in the coming years, and aligns well with the analysis of Scotland's needs undertaken by the EC.

SRDP budget and transfer from DP

74. The total budget that we are seeking to deliver for the future programme is £1.326 billion. This is made up from various sources set out below. It is important to note that this is a target only, we cannot predict with any certainty the availability of domestic funding to match the EU element in light of recent cuts from the UK Government and the likelihood this will continue in the future. We have however sought to maximise domestic resources as much as we can.

75. The SRDP budget allocation from the UK Government is €478 million, although on the face of it this is an increase of 7.8% it is in reality a cut in real terms of around 5.5%, even before reductions to domestic budgets are factored in.

76. As we need to match RD funding with domestic funds, the financial situation is even more perilous given the spending cuts passed down to Scotland by the UK government. The Scottish Government's budget is being cut by close to 11 per cent in real terms between 2010-11 and 2015-16. Based on the projections set out in this year's UK Spending Round, it is likely that further budget reductions will be imposed on Scotland until at least 2017-18. This gives us a significantly reduced starting point for future allocations to SRDP in comparison to the beginning of the current programme.

77. Given the financial situation there is a need to look at other ways to increase the budget available to us for investments in our rural areas. Through the DP regulations Scotland has the discretion to transfer up to 15% of the total DP budget into the SRDP. At the time of writing Scotland's 2014 - 2020 DP ceiling is €3.5bn before any transfer to SRDP takes place.

78. Given the scale of investments we believe are necessary in our rural areas to ensure they can remain viable places to live, work and enjoy; we are proposing to apply a transfer of around 9.5% from DP into Rural Development. As we have to inform the EC of the rate of transfer by end of December, we have issued a separate mini-consultation^[8] on the transfer rate setting out the rate we are minded to set. The final figure will be confirmed after the mini-consultation closes and a revised SRDP budget section will be issued if necessary.

79. There was strong support for a transfer in the first consultation with 93% of respondents stating the level of transfer be continued at current levels or increased. Although it is vital we have an appropriately funded SRDP in order to deliver our full range of priorities for Rural Scotland, we must also ensure that the primary agricultural sector remains viable through the crucial funding made available from the DP.

80. It is the agricultural sector that helps to ensure our rural communities remain viable places to work and live by providing a broad range of employment opportunities either directly or indirectly. The sector also provides locally grown produce for us all, as well as enabling the significant success we have seen in recent years for our food and drink industry. We have therefore proposed the rate of 9.5% with this in mind; although we understand that some will be disappointed a full rate has not been applied we believe this is a fair balance between the two pillars of CAP.

Budget prioritisation

81. Support for the agricultural sector remains a prominent part of the future SRDP, underlining our commitment to this vital sector for the rural economy. The future SRDP will continue to invest a significant proportion of its budget (35%) to LFASS and its successor scheme, and we will also ensure that crofters, small farmers and new entrants have the opportunity to access an improved structure of support.

82. We must also ensure that our environment is protected and enhanced, and that we mitigate and adapt to the impact of climate change. The European Regulations set a minimum spend figure for the environment and climate change of 30% of the total budget. This is made up from spending on LFASS/ANC, agri-environment and climate projects, forestry, organics, and Natura measures. Scotland meets this target with our budget for LFASS alone, and we will also spend 19% of the budget on forestry. However this would not meet the range of obligations we face in this area, particularly given that the positive impact of Greening DP is far less than we had hoped for due to the failure of Europe to agree a workable solution.

83. Scotland's performance against the indicators we set to measure environmental progress, although strong in a European context, have suffered in recent years due to increased impact of climate change and farming practices. For example, the Index of Abundance for Scottish Terrestrial Breeding Birds is recognised as a good indicator of general biodiversity and has been in decline for the last three years. This decline in biodiversity is identified in other studies and reports (The Countryside Survey; The National Ecosystem Assessment; The Status of Priority Farmland Habitats and Species). To address this decline, and build on the successes we have seen to date, we will be allocating 27% of the SRDP budget to agri-environment and climate projects implemented by farmers and land managers across rural Scotland, as set out in section 9.

84. Due to the wide range of environmental and agricultural obligations and needs Scotland has, the land based elements must remain a significant part of the future SRDP in terms of budget allocations. However broader economic and social development will play an important role in the future programme through the provision of targeted support to key sectors, and community-led local development through LEADER.

85. Targeted support for key sectors will be directed towards food and drink and small rural businesses. The food and drink arena is a key growth sector for Scotland and the SRDP has funded a wide range of important projects that have helped to create and sustain thousands of jobs. The important contribution that small businesses make towards the viability of rural communities, and the quality of life within them, is recognised by the dedicated support arrangements we are making available. This support will build on that provided by other public funds from the ERDF, enterprise agencies and local government as set out in sections 12 and 13.

86. LEADER will provide opportunities for all within local communities to come together and address issues they identify as a priority for their area. These priorities can cover a wide range of issues, as long as they are agreed by the community and fit within the overarching framework under which LEADER will operate. LEADER is discussed further at section 14.

87. While we will directly address our key priorities as outlined above, support for the historic environment, quality assurance programmes and animal welfare will be embedded into other schemes such as Agri-Environment-Climate and Knowledge Transfer and Innovation Fund; or in the case of relevant quality assurance schemes given recognition through the assessment process.

Budget breakdown

88. The £1.326 billion budget would be made up from several contributory factors (EU funds, domestic and funds transferred from DP) and is a target at present based on domestic budget allocations, transfers from DP, and euro exchange rates. This could change significantly throughout the programme so scheme allocations set out in the table below are only indicative and will be managed on an annual basis throughout the programme period.

89. The indicative budget allocations we are proposing are:

Scheme/priority	Allocation (£)	Justification
LFASS Scheme is being reviewed in line with European regulations.	£459m	This scheme provides essential support to fragile farming businesses in remote and constrained rural areas. Without this support there would be clear risks that these businesses would become unviable which could have a devastating impact on rural populations. Although the budget allocation is large, this is provided for from the funds we are transferring from direct payments, and will provide welcome support to roughly 11,500 small businesses.
Forestry	£252m	Tree-planting is a significant rural contributor to the Scottish Governments efforts to reduce Scotland's carbon footprint. The 'Low Carbon Scotland' Report (Second Report on Policies and Proposals) forecasts saving of 4.8 million tonnes CO2 emissions by 2027 based on 10,000 hectares of woodland creation per year. We will continue to set the target of 10,000 hectares planted per annum during the programme period. The forestry budget will also fund the restoration of designated and ancient woodland sites and priority activities to support sustainable woodland management such as forest management plans and measures to reduce the impact of tree diseases.
Agri-Environment-Climate Also included is £15m for peatland restoration	£355m	Ensures that as a minimum we can maintain the benefits gained under the current programme. Through the more effective targeting and assessment process allied to improved guidance and support, we are aiming to increase the benefits gained for the current levels of investment.
New entrants	£20m	Generational renewal is an area that we need to address in the Scottish agricultural sector. We have an ageing agricultural workforce and a lack of opportunities new young farmers to enter the market. Tied to the improvements we have secured for new entrants for DP we will seek to provide small but crucial support to new entrants through a range of measures.
Crofting and Small Farms + one year of current CCAGS in 2014	£20m	The crofting sector is unique to Scotland and is a vital component of our cultural heritage. This scheme will provide grants to crofters to take forward improvements on their crofts which will help to sustain their business and enable co-operative working. We are also broadening the scheme to open it up to small farms too given they face the same type of issues as crofters regarding sustainability.
Business support - Food and Drink Support	£70m	The purpose of the Scottish Government is to achieve sustainable economic growth. All of our spending plans are aligned to this purpose in some way. It is this scheme that looks to provide support to the non-primary agricultural business' in the food and drink sectors who are key drivers of growth and sustainability in our rural areas.
Small Rural Business Scheme	£20m	The purpose of the Scottish Government is to achieve sustainable economic growth. This scheme will be targeted to small non-agricultural rural businesses (including social enterprises and farm diversification projects) which although not a driver of economic growth can play a significant role in the sustainability of our rural communities.
LEADER (local development)	£66m*	LEADER will provide opportunities for individuals, business and communities to come together and support rural development and provide lasting benefits to the local area.
Support for Co-operative Action	£10m	The majority of the funding for co-operative projects will come from the scheme allocations that the project relates to. However a small allocation is provided for here in order to facilitate the project itself. It will drive forward improvements at an ecosystem scale in order to achieve environmental obligations more effectively. We are also considering the potential to support machinery rings through this approach.
Knowledge Transfer and Innovation Fund	£10m	Scotland must take advantage of its strong performance in research and development and ensure that the learning from here and elsewhere can be transferred to on the ground improvement. The Scottish Government currently invests more than £60m per year on high quality research in rural and environment as part of its Strategic Research Programme. This scheme will provide a route for clusters, networks, groups of interested parties to come together to develop new ways of working based on this rich resource and potentially deliver significant benefits.
Advice	£20m	This is closely tied to the above and will play a key role in ensuring best practice and learning can be implemented on the ground.
Broadband	£9m	Budget provision for broadband
Technical Assistance	£15m	Cost of Scottish Rural Network and SRDP implementation, evaluation and monitoring.
Total	1.326bn

*LEADER has a minimum spending requirement of 5% of total budget

Table 2: Proposed SRDP 2014 - 2020 budget allocations.

90. This distribution of funding reflects the very significant role of land management in protecting and enhancing the environment and, in turn, the impact of land management on the viability of rural businesses and the cohesiveness and sustainability of rural communities.

91. During the course of the programme, the Scottish Government will have the flexibility to change the profile of these investments to ensure the resources can be directed to manage emerging and new priorities.

Question 1

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