Scottish Budget 2019-2020

Chapter 12 - Rural Economy

Portfolio Responsibilities

Rural Economy is a diverse portfolio responsible for rural Scotland by working with the public, private and third sectors and with local communities. It includes the Scottish Government lead on farming and food production, animal health and welfare, rural economic development, food and drink, fisheries, aquaculture, forestry and islands and to take forward recommendations from the National Council of Rural Advisers.

Portfolio Priorities

The priorities of Rural Economy contribute to National Outcomes: Economy, Poverty, Education, Fair Work and Business, Environment, Culture, Human Rights, Communities and International.

This links to the National Outcomes to 'have a globally competitive, entrepreneurial, inclusive and sustainable economy', 'value, enjoy, protect and enhance our environment', 'to live in communities that are inclusive, empowered, resilient and safe', 'be well educated, skilled and able to contribute to society' and 'to tackle poverty by sharing opportunities, wealth and power more equally'.

Our overarching priority is to ensure a sustainable and prosperous rural Scotland. We will work to ensure our economic strategy applies equally to Scotland's rural, island and coastal communities and that all of Scotland benefits from the natural and cultural assets from our rural and coastal lands. We will do this by:

• Delivering the Scottish Rural Development Programme (SRDP) under Common Agricultural Policy for as long as it applies to Scotland.
• Investing in our core services to minimise the disruptive impact of EU exit on people, businesses and communities.
• Enabling and encouraging sustainable and productive development, enterprise and investment in the rural economy.
• Encouraging low carbon and more efficient farming and enabling more tree planting and woodland creation.
• Building on current success in our world-class food, drink and forestry sectors.
• Helping people and businesses in rural, coastal and island communities to flourish.
• Providing over £74 million of resource and capital to our rural enterprise bodies to support businesses, infrastructure, projects and communities.
• Delivering world-class science support to protect Scotland from plant disease.
• Delivering statutory veterinary services to Scotland's farming and food production sectors to guarantee animal welfare, traceability and food safety.
• Developing a rural economy for the future by taking forward recommendations from the National Council of Rural Advisors, Agriculture Champions and from the consultation 'Stability and Simplicity: Proposals for a rural funding transition period.'

EU Support and Related Services Priorities

We will support our farmers and crofters to produce high quality food sustainably and efficiently, which supports the economy National Outcome.

In 2019–20 we will:

• Provide financial security and certainty to Scotland's farmers and crofters by delivering the Common Agricultural Policy (CAP) efficiently and effectively.
• Continue to implement our Plan for Stabilisation, reflecting the needs of our customers including ensuring that farmers receive payments promptly.
• Within CAP, continue to deliver the Scottish Rural Development Programme (SRDP), including continued support for agri-environment, farm advice and knowledge transfer, crofting and the food and drink sector.
• Maintain payments at the maximum level permitted for the Less Favoured Area Support Scheme to provide stability to the most fragile farm businesses.
• Develop plans to simplify current CAP schemes to transition to a new approach to rural support post-EU exit.
• Deliver key aspects of Farming for the Future climate change commitments.

Rural Services Priorities

Through our Rural Services budget, we will provide direct funding for farming, crofting and rural development projects which supports the economy National Outcome.

In 2019–20 we will provide direct funding to farmers through CAP and support industry by:

• Working with current and potential customers of our rural services and key stakeholders to stabilise and simplify farming, food production and wider rural economic development support after EU exit.
• Monitoring for the presence of plant and animal disease, prevent, control or eradicate any outbreaks, and improve the welfare of kept animals including protection of the health of animals and humans by funding delivery partners including the Animal and Plant Health Agency and Scotland's Rural College (SRUC) to deliver official controls and the Veterinary Surveillance Programme respectively.
• Providing advice, information and resources to farmers and crofters via the Farm Advisory Service (FAS) which aims to improve profitability and environmental performance, including meeting our climate change mitigation ambitions.
• Continuing to take forward a range of priority actions on crofting, including production of a national development plan for crofting, providing more croft house grants and progressing review of crofting legislation.
• Taking forward the actions recommended by the Women in Agriculture Taskforce including establishing a Leadership Development Programme, developing a Charter for Equality and improving training across the country for women involved in farming and crofting.

We will continue to support the growth of the food and drink industry to deliver its ambition to double its value to £30 billion by 2030. Our focus continues to be on supporting our food and drink businesses to grow and diversify, and on promoting locally-sourced and locally-produced food and drink to a range of markets by:

• Investing £7.5 million to support the delivery of the national food and drink strategy, Ambition 2030.
• Continuing to support businesses to invest and expand through our Food, Processing, Marketing and Cooperation grant scheme.
• Investing in a new food and drink export plan to build on the growth in food and drink exports which are up 70 per cent since 2007.
• Sourcing more local produce through public sector contracts and continuing to invest £0.4 million to expand the Food for Life Programme to more schools in more local authority areas.
• Investing, jointly with industry, in the supplier accreditation programme to support small and medium businesses obtain third-party accreditation to help them target new domestic and international markets.
• Investing £0.4 million in the second phase of our Food to Go initiative, stimulating more local sourcing through our convenience sector and tackling food waste.
• Progressing our Good Food Nation objectives through the delivery of our Good Food Nation programme, including creating more opportunities for school children to visit a farm to raise their awareness of where their food comes from and the vital role Scottish farmers' play as custodians of the countryside.

Fisheries and Aquaculture Priorities

We will continue to support activity which builds growth across Scotland's marine and coastal communities, supporting employment, research and innovation and securing investment, by delivering sustainable economic growth in the sea fisheries, inshore fisheries and aquaculture sectors, and championing high environmental standards. This supports the economy and environment National Outcomes.

In 2019–20 we will:

• Maximise the benefits of the European Maritime and Fisheries Fund to support key projects across the marine sector, creating and safeguarding jobs in remote rural areas and supporting community-led local development.
• Through the European Maritime and Fisheries Fund, continue to develop the high quality fisheries processing sector to deliver jobs and economic prosperity. Additionally we will continue to sustain existing markets and develop new premium markets for quality Scottish seafood products.
• Continue to deliver on the strategic farmed fish health framework to support the aquaculture sector's 2030 sustainable growth ambitions and work more generally to aid the sustainable growth of the sector.
• Continue to identify where emergency support to fisheries harbours can deliver long-term benefits to the wider fishing communities around Scotland and provide key funding to ensure their continued operation.
• Continue to support the inshore and offshore sea fisheries sectors and to protect Scottish interests in the negotiation of fishing opportunities.
• Develop a first–class Scottish fisheries management regime for the future through a national discussion on the future management of sea fisheries in Scotland.

Rural Economy Enterprise Priorities: Highlands and Islands

As the Scottish Government's main economic and community development agency for the Highlands and Islands, the Highlands and Islands Enterprise (HIE) budget works to accelerate business growth, strengthen communities, support growth sectors and develop Scotland's Highlands and Islands as a good place to do business, to stay in, to invest in, and to make a life which supports the communities National Outcome.

A key focus for HIE will be to inform and deliver the collaborative actions agreed by the Strategic Board in order to be responsive to emerging themes and priorities of the Board. As a key partner within the Strategic Board, HIE will play a vital role in the delivery of both Scotland's Economic Strategy and the Strategic Board's Strategic Plan. In 2019–20, HIE's focus will be on:

• Accelerating business growth by supporting businesses to increase productivity through investment, innovation and internationalisation.
• Strengthening communities through supporting the growth of the social enterprise sector, and enabling communities, particularly in remote and rural areas, to make a significant contribution to place-based development.
• Supporting growth sectors with a focus on subsectors and supply chains offering distinctive regional opportunities.
• Developing regional attractiveness by making the Highlands and Islands a globally attractive region in which to live, work, study and invest.

Rural Economy Enterprise Priorities: South of Scotland

Delivering our commitment to establish a new public body to address the enterprise and skills challenges facing the south of Scotland, we have introduced legislation to establish South of Scotland Enterprise^[1] South of Scotland Enterprise will help drive forward inclusive growth and fair work, sustain and grow communities and harness the potential of people and resources. Our aim is to have a Chair and Chief Executive recruited by winter 2019 and the new body established by 1 April 2020. The budget will meet the set up costs including recruitment, staffing, estates, IT and corporate services and to continue to support the work of the South of Scotland Economic Partnership.

The Partnership will continue throughout 2019 to invest further in creating a fresh approach to economic development in the South of Scotland. We will continue to invest in the work of the Partnership. This supports the fair work and business National Outcome.

In 2019–20 we will:

• Work toward establishing South of Scotland Enterprise.
• Invest in projects and economic activity across the region through the South of Scotland Economic Partnership.
• Support increased alignment and stronger relationships with local and national organisations to benefit the south of Scotland area.

Forestry Priorities

Forestry contributes around £1 billion per year to the Scottish economy and supports more than 25,000 full-time equivalent jobs. Our Programme for Government includes ambitious plans to maximise the contribution of forestry and woodland to Scotland's economy, our climate change ambitions and to wider social, health and environmental benefits. This supports the environment and economy National Outcomes, and in 2019–20 we will:

• Introduce new arrangements for the management of forestry in Scotland, under the Forestry and Land Management (Scotland) Act 2018, including establishing two new Scottish Government agencies and implementing new felling regulations.
• Continue to stimulate and enable woodland creation across Scotland to achieve the target of 10,000 hectares, and prepare for an increase to 15,000 hectares by 2025.
• Work with the forestry sector and Forest Research to develop new information on tree-felling activity across Scotland, using remotely-sensed data.
• Achieve £3 million of community benefits from renewable energy installed on Scotland's National Forest Estate.

Spending Plans

Table 12.01: Spending Plans (Level 2)

Level 2	2017–18 Budget £m	2018–19 Budget £m	2019–20 Budget £m
EU Support and Related Services	177.6	178.4	176.8
Rural Services	42.4	32.4	35.0
Fisheries and Aquaculture	6.4	5.9	5.9
Rural Economy Enterprise	67.0	81.7	74.4
Scottish Forestry	40.6	44.0	43.2
Forestry and Land Scotland	20.7	19.7	15.7
Total Rural Economy	354.7	362.1	351.0
of which Operating Costs*	–	–	89.0
Non-cash	29.3	47.7	37.6
Capital	84.7	77.4	67.0
Financial Transactions	5.0	5.0	5.0
UK Funded AME	–	–	–

* In 2019–20, there is a change to the way that Scottish Government staffing budgets are presented and total operating costs are now included within portfolio budgets. This is set out in more detail in the Annex on operating costs.

Presentational Adjustments for Scottish Parliament Approval

Level 2	2017–18 Budget £m	2018–19 Budget £m	2019–20 Budget £m
Crofting Commission (NDPB Non-cash)	–	(0.1)	(0.1)
Highland and Islands Enterprise (NDPB Non-cash)	(11.1)	(15.0)	(5.0)
Forestry Commission – shown separately	(61.3)	(63.7)	–
Animal Licence Fees (Other)	0.1	0.1	0.1
Total Rural Economy	282.4	283.4	346.0
Total Limit on Income (accruing resources)	800.0

What the EU Support and Related Services budget does

The EU support and related services budget supports and protects primary productivity in the agricultural and wider rural sector through the delivery of EU funding (European Agricultural Guarantee Fund) under direct support measures. The Scottish Rural Development Programme (SRDP) provides for National and EU funding (European Agriculture Fund for Rural Development) to support measures which deliver economic, environmental and community benefit for rural Scotland.

The delivery is underpinned by the provision of regulatory inspection functions, scientific and technical advice, monitoring and evaluation as well as new improved business processes.

Table 12.02: EU Support and Related Services Spending Plans (Level 3)

Level 3	2017–18 Budget £m	2018–19 Budget £m	2019–20 Budget £m
Pillar 1 – Basic payments	262.0	262.0	262.0
Pillar 1 – Greening payments	131.5	131.5	131.5
Pillar 1 – payments	44.5	44.5	44.5
Broadband	6.4	7.0	–
Agri Environmental Measures	55.1	46.4	43.0
Business Development	30.2	27.8	24.1
CAP Compliance Improvements	42.2	31.0	–
Crofting Assistance	0.3	(0.2)	0.8
EU Income	(535.2)	(543.6)	(533.7)
Forestry	1.4	1.0	0.9
Leader	10.1	22.9	20.4
Less Favoured Area Support Scheme	65.5	65.5	52.4
ARE Operations (Including Non-cash)	62.9	82.0	129.9
Technical Assistance	0.7	0.6	1.0
Total EU Support and Related Services	177.6	178.4	176.8
of which:
Fiscal Resource	103.5	102.7	113.2
Non-cash	18.2	32.5	32.5
Capital	50.9	38.2	27.1
Financial Transactions	5.0	5.0	4.0
UK Funded AME	–	–	–

See footnote on operating costs in Table 12.01.

What the Rural Services budget does

The rural services budget directly supports sustainable rural development through funding measures which deliver economic, environmental and community benefit for rural Scotland, providing direct support to farming, forestry, crofting and rural development projects. It also contributes to the delivery of reducing greenhouse gas emissions.

Table 12.03: Rural Services Spending Plans (Level 3)

Level 3	2017–18 Budget £m	2018–19 Budget £m	2019–20 Budget £m
Agricultural and Horticultural Advice and Support	9.5	4.5	2.2
Animal Health	18.2	15.2	17.8
Crofting Commission	2.5	2.9	2.8
Food Industry Support	6.0	5.0	6.5
Rural Cohesion	1.0	0.6	0.6
Veterinary Surveillance	5.2	4.2	5.2
Total Rural Services	42.4	32.4	35.1
of which:
Fiscal Resource	40.8	32.3	35.0
Non-cash	–	0.1	0.1
Capital	1.6	–	–
Financial Transactions	–	–	–
UK Funded AME	–	–	–

See footnote on operating costs in Table 12.01.

What the Fisheries and Aquaculture Grants budget does

The Fisheries and Aquaculture budget supports the sustainable use of the marine environment by providing the domestic funding contribution towards the European Maritime and Fisheries Fund. The budget also provides funding towards harbour repairs caused by storm damage.

Table 12.04: Fisheries and Aquaculture Spending Plans (Level 3)

Level 3	2017–18 Budget £m	2018–19 Budget £m	2019–20 Budget £m
EU Fisheries Grants	14.2	14.1	14.1
Fisheries Harbour Grants	0.4	0.4	1.0
Marine EU Income	(8.2)	(8.6)	(9.2)
Total Fisheries	6.4	5.9	5.9
of which:
Fiscal Resource	2.0	1.5	1.5
Non-cash	–	–	–
Capital	4.4	4.4	4.4
Financial Transactions	–	–	–
UK Funded AME	–	–	–

What the Rural Economy Enterprise budget does

The budget funds Highlands and Islands Enterprise (HIE), the main economic development body operating in the Highlands and Islands, in some of the most remote and fragile areas of Scotland. In addition to HIE activities this budget supports other activities in the Highlands and Islands area. See Table 12.05.

The budget also supports the Scottish Government's ambition to drive forward inclusive growth and support communities across the south of Scotland and to deliver on our commitment to establish a South of Scotland Enterprise Agency by April 2020.

Table 12.05: Rural Economy Enterprise Spending Plans (Level 3)

Level 3	2017–18 Budget £m	2018–19 Budget £m	2019–20 Budget £m
Highlands and Islands Enterprise	67.0	71.7	61.1
South of Scotland Enterprise	–	10.0	13.3
Rural Economy Enterprise	67.0	81.7	74.4
of which:
Fiscal Resource	29.8	33.5	34.5
Non-cash	11.0	15.0	5.0
Capital	26.2	33.2	33.9
Financial Transactions	–	–	1.0
UK Funded AME	–	–	–

See footnote on operating costs in Table 12.01.

What the Scottish Forestry budget does

The budget enables Scottish Forestry to deliver the Scottish Government's forestry functions including forestry policy, the promotion of sustainable forest management, the delivery of the Scottish Government's forestry targets and forestry regulation. Forestry grants support the private forestry sector's contribution to the expansion and sustainable management of Scotland's woodlands and is part of the CAP Reform for the Scottish Rural Development Programme.

Table 12.06: Scottish Forestry Spending Plans (Level 3)

Level 3	2017–18 Budget £m	2018–19 Budget £m	2019–20 Budget £m
Programme and Running costs	16.0	14.8	17.9
Depreciation	0.1	0.1	0.1
Policy Regulation and Administration	4.3	3.9	–
Woodland Grants	40.0	46.0	46.0
EC Receipts	(19.8)	(20.8)	(20.8)
Total Scottish Forestry	40.6	44.0	43.2
of which:
Fiscal Resource	40.5	43.9	43.1
Non-cash	0.1	0.1	0.1
Capital	–	–	–
Financial Transactions	–	–	–
UK Funded AME	–	–	–

What the Forestry and Land Scotland budget does

Supports the sustainable management of Scotland's National Forest Estate by Forestry and Land Scotland, funding community, tourism and environmental delivery, including commitments on rural tourism and ancient woodland restoration.

Table 12.07: Forestry and Land Scotland Spending Plans (Level 3)

Level 3	2017–18 Budget £m	2018–19 Budget £m	2019–20 Budget £m
Forestry and Land Scotland Resource	19.1	18.1	14.1
Forestry and Land Scotland Capital	1.6	1.6	1.6
Total Forestry and Land Scotland	20.7	19.7	15.7
of which:
Fiscal Resource	19.1	18.1	14.1
Non-cash	–	–	–
Capital	1.6	1.6	1.6
Financial Transactions	–	–	–
UK Funded AME	–	–	–

Footnote

1. http://www.parliament.scot/parliamentarybusiness/Bills/109840.aspx