Scottish Rural Development Programme 2014-2020: ex-post evaluation - main report

9. Focus Area 3A

Introduction

This chapter answers the evaluation question related to FA 3A.

CEQ 6: To what extent have RDP interventions contributed to improving the competitiveness of supported primary producers by better integrating them into the agri-food chain through quality schemes, adding value to the agricultural products, promoting local markets and short supply circuits, producer groups and inter-branch organisation?

Contribution to FA 3A

Public expenditure

One SRDP 2014-2020 scheme was programmed to contribute to FA 3A, the FPMC scheme.

There were also some on-going commitments from the 2007-2013 Programme for the LMO and RP schemes with expenditure incurred up to and including 2019, see Table 9.1.

Source: Scottish Government, Annual Implementation Report, 2023.

Points to note from the AIR 2023 include that:

• there was a total committed expenditure of €87.1 million and a realised expenditure of circa €67.1 million – and all four Measures programmed under FA 3A recorded expenditure during the 2014-2020 Programme period.
• the vast majority of both the committed and realised expenditure was under Measure 4 (Investments in physical assets) – supported in the main through the FPMC scheme.
• Measure 3 (Quality schemes for agricultural products and foodstuffs) and Measure 14 (Animal welfare) were not supported by the SRDP 2014-2020 schemes – rather they were delivered by on-going commitments from the previous Programme period (committed and realised expenditures for both Measures were circa 100%).
• the committed expenditure for Measure 16 (Cooperation) was almost three times the planned expenditure, while the realised expenditure was slightly higher than the planned expenditure - this reflects that committed expenditure does not necessarily equate to realised expenditure and there may also be a difference resulting from different exchange rates used between Pounds Sterling and Euros for expenditure figures.

Performance indicators

A summary of the outcomes achieved under FA 3A is provided in Table 9.2 and Table 9.3.

Table 9.2 provides a cumulative summary of outcomes and Table 9.3 provides a detailed annual performance for outcome 4 (O4).

Source: Scottish Government, Annual Implementation Report, 2023.

Source: Scottish Government, Annual Implementation Report, 2023.

There are also two targets that relate to FA 3A, one of which is a Programme specific target.

The first target that relates to FA 3A is based on the percentage of agricultural holdings that receive support for participating in quality schemes, local markets and short supply chains, and producer groups/organisations.

The vast majority of agricultural holdings that received such support were funded through commitments made under the 2007-2013 Programme (LMO scheme). These commitments decreased as the 2014-2020 Programme period progressed. Points to note include that:

• the LMO scheme supported 7,683 holdings during the 2014-2020 Programme period - the remaining two holdings were supported by the FPMC Scheme.
• the percentage of agricultural holdings that received this type of support during the 2014-2020 Programme period is 14.69% - this is below the target value of 15.54%.
• almost all agricultural holdings that participated in this type of support received support via Measure 3 - given that this Measure was not supported by any of the new or continuing schemes that made up the SRDP 2014-2020, it is to be expected that the target value was close to being achieved in the first few years of the 2014-2020 Programme period.

The Programme specific target is based on the percentage of total agri-food businesses supported under Measure 4. Points to note include that:

• 164 operations received support for investments in processing/marketing and/or development of agricultural products by the end of 2023.
• all but two of the operations supported were supported by the FPMC scheme - the remaining two were on-going commitments from the 2007-2013 Programme (RP Scheme).
• this equates to 18.74% of the total number of agri-food business supported – this is greater than the target of 13.00% during the lifetime of the Programme.

The planned output indicator for the number of agri-food business supported was amended as part of previous modifications of the Programme. The planned output is now 166 operations or 18.97% of agri-food businesses. By the end of the Programme period, 98.80% of the amended planned output for the number of agri-food business supported had been achieved.

Wider commentary at a scheme level

The enhanced AIR 2018 noted that in examining the quantitative data to help answer this CEQ there was mismatch between the judgement criteria and the Common Results Indicators set within the CMEF; the first two listed criteria are concerned with increases whereas the indicators relate to static percentages.

Further, the Additional Results Indicator chosen for competitiveness is partial and potentially misleading (high output farms are not necessarily more competitive), and an increased percentage of price retained by primary producers is not necessarily something that is beneficial (and again the proposed indicator is a static observation, which is inappropriate).

While an increase in added value of primary producers would be a more acceptable in the context of assessing a contribution to greater competitiveness, no such additional indicator is proposed. Because of these fundamental problems, it is perhaps not a drawback that currently no data are available for these indicators.

Food Processing, Marketing and Cooperation Scheme

The FPMC has been in existence since the 1970s, and under the SRDP 2014-2020 opened in 2015.

All public expenditure incurred by the FPMC scheme was programmed under FA 3A. Realised expenditure for the FPMC was circa €60.5 million (90.3% of total expenditure realised under this FA) – with almost all public expenditure for FPMC (98.1%) incurred under Measure 4 and the remainder (1.9%) incurred under Measure 16.

The FPMC scheme aimed to help Scotland become a wealthier, healthier, and more environmentally friendly nation through supporting Scottish food and drink processing businesses to undertake:

• largely capital projects such as processing facilities and equipment
• revenue projects including marketing, cooperative, efficiency initiatives, albeit uptake was limited.

The core aims of the programme fit under three broad themes, including:

• economic security and growth - for example, through local and international trade of Scottish produce, jobs created, and business resilience.
• reduced environmental impact at local and global levels - for example, more sustainable practice.
• improved health and wellbeing of individuals and communities - for example, through better knowledge and consumption of healthy and local food.

Follow-up monitoring of supported businesses did not capture data related to the CEQ nor did the internal scheme evaluation. As such evidence is somewhat lacking on the impact of the FPMC on participation of primary producers in short-circuit schemes, quality-orientated producer groups and inter-branch organisations.

The overall purpose of the FPMC scheme was not to improve the competitiveness of primary producers – rather its main function was to support more sustainable economic growth of the food industry, including through greater cooperation and collaboration, from primary production to final market. The application, assessment, and monitoring forms examined environmental and health impacts, and economic impacts were prioritised.

Any impact on primary producers was therefore expected to be indirect (unless they also happen to be food processors, as some were). It was anticipated that supporting food and drink processors would lead to greater use of local Scottish produce – and that this would in turn benefit primary producers. However, there is no way to ensure that local produce is used and is inherently difficult to monitor.

Those involved in scheme delivery also confirmed that the FPMC has had a positive (albeit indirect) impact on primary producers and their competitiveness and enhanced their value added. This is in line with the intervention logic for the scheme.

Data confirms that the FPMC funding provided under FA 3A was directed almost entirely at assisting capital investments (Measure 4) rather than cooperation (Measure 16).

Investing in infrastructure and capital projects such as processing facilities and equipment are, however, ways in which businesses can look to increase their overall efficiency and productivity, and ultimately improve their competitiveness. The projects have led to job creation (as well as projected or safeguarded existing jobs) in supported food and drink processing businesses.

Five cooperation projects were supported by the FPMC – and demand was lower than expected. Most of the cooperation projects tended to be vertical cooperation through integration. There was some horizontal cooperation facilitated by the FPMC at the primary producer level (for example, grain silos and drying facilities), and issues of commercial sensitivity can often inhibit cooperation further up the food chain.

Some projects supported farmers to undertake on-farm processing; in these cases it is likely that there will be an increase in the added value of primary producers. Such projects were, however, not typical of FPMC-assisted activities. The impact on prices received by primary producers, and their margin in the final price of agricultural products is also uncertain.

Similarly, there was expected to be impact on short supply chains (this is examined as part of the assessment process). For example, there may be more use of local markets by supported projects, though this was not specifically targeted or monitored.

The internal evaluation of the FPMC was published in September 2019. This evaluation focussed on: applicants’ and experts’ experiences of application and assessment procedures; how the applicants’ projects adhered to the objective of the scheme and those of the SG; and recommendations for any future replacement scheme. The internal evaluation of the FPMC comprised a mix-methods analysis of recorded project data, a grant recipients online survey (112 responses), unsuccessful applicants online survey (102 responses), and stakeholder and applicant semi-structured interviews. It was undertaken when the FPMC was live and most projects were still ongoing – findings therefore provide a partial rather than complete picture on, for example, impact. The evaluation report also outlines limitations around the quality and quantity of monitoring data and resulting limitations in its analysis.

Points to note from the FPMC evaluation include that:

• there was widespread support for the existence of the FPMC grant scheme among those consulted – in particular it was perceived to fulfil a unique and important purpose in supporting capital projects of food and drink processing businesses.
• the scheme provided grants to support development of 119 capital (physical assets) and non-capital projects among existing small, medium, and large Scottish food and drink businesses and the establishment of new businesses by the first quarter of 2019. Note: the final number of projects supported was 162.
• the FPMC was successful in supporting projects located throughout Scotland although the majority were located in the central belt and to the East of mainland Scotland (as to be expected as this is where Scotland’s main population and business centres are).
• the FPMC supported a diverse range of projects by sub-sector, with fruit and vegetable most common, followed by meat and alcohol – other sub-sectors supported included cereal, dairy, and eggs.
• the FPMC’s increasing popularity among new and repeat applicants across all sectors, sizes and locations within Scotland was testament to its overall effectiveness.
• most applicants were satisfied with the overall application process.

The evaluation also highlighted scheme issues and challenges, most notably that:

• while a high proportion of businesses benefitted from multiple FPMC awards over several funding rounds, successful applicants were also more likely to have used an agent to help them in their application.
• while most applicants were satisfied with the overall application process, there were various suggestions for improvement – for example, better and more transparent guidance, more flexibility, targeted support for smaller businesses, and revision of the current rules preventing projects to begin before the application outcome is confirmed.
• there was broad agreement that the scheme would benefit from revising how it treats businesses of different size in order to better support smaller businesses.
• stakeholders and experts expressed concern about the use of agents to assist with application forms, and this was perceived as inequitable especially for smaller businesses that were less able to afford agents’ fees (and may be disadvantaged) – this issue is not unique to the FPMC, and a similar concern was raised in other scheme evaluations, including the capital grants evaluation (EKOS Ltd, 2024) which covered CAGS, NECGS and SFGS.

In terms of impact, the internal evaluation of the FPMC scheme concludes that:

• there is evidence to show that FPMC is having a positive impact on the Scottish economy, population health, and environmental sustainability - however, these contributions were not evenly spread between different sectors, indicating possible areas for improvement.
• the predicted total number of jobs safeguarded from capital projects across all sectors was 5,784, and the total number of jobs created was 1,200, totalling 6,984^[19] – the figure is unequally distributed between sectors with meat creating and safeguarding substantially more jobs than all other sectors combined.
• the average cost per job (FPMC expenditure divided by jobs) created or safeguarded (FTE-adjusted) was £12,614 – alcohol was the only sub-sector to exceed the predicted cost (+/- 5% error margin) and it did so substantially.
• survey feedback suggests that in most cases jobs created and/or safeguarded would not have possible been without FPMC.
• provenance and destination of inputs and outputs for successful projects is generally good - it could be better although this is complicated by the need to balance against other sometimes economic and non-economic impacts.
• it is not always clear about whether economic figures provided by grant recipients refer to the business as a whole or the effects of the FPMC-funded component specifically. Being able to draw conclusions about the contributions of FPMC is therefore difficult given that FPMC only partially supports a single non-exclusive component of the total business.
• health is not actively prioritised for FPMC by applicants - nevertheless there is widespread agreement that health should remain an important consideration in order to align closely with wider Scottish Government policy – and that there may be room for a more flexible understanding of health that extends beyond its traditional notion as merely physical, towards a more updated and comprehensive understanding that regards physical, social, and mental wellbeing.
• processing methods and perceptions of environmental sustainability improved as a result of the grant-assisted projects.

While jobs safeguarded and created were covered in the scheme evaluation this was reported at a specific point in time. As part of the ex-post SRDP evaluation, updated data was provided by SG, see Table 9.4. This shows that 8,995 jobs were either safeguarded or created as a result of the FPMC.

Source: Scottish Government, FPMC 2014-2020, job numbers (for 137 projects).

Note: It is not clear if this is reported as gross or FTE jobs.

The internal evaluation of the FPMC presented several recommendations for any future iterations of the FPMC scheme, namely to:

• improve applicants’ guidance materials, including more information on the application process, such as what to expect and when to expect it and what makes projects more or less likely to be successful.
• better support for smaller businesses, for example, by enhancing flexibility to take account of their lack of resources (records, agents/administrative staff, financial capital) available to boost an application, relative to larger and more experienced applicants.
• consider the suitability of alcohol and non-capital projects on the scheme.
• consider the possibility of additional support for the grants team to assist them in tasks including grant recovery from projects that fail to meet their conditions.
• improve monitoring in order to provide future evaluations with better quality and quantity of data for analysis.
• undertake further research to help minimise current limitations of data informing this evaluation.
• consider the opportunity for changes post Brexit, namely to: allow projects to commence at their own risk before confirmation of their application to reduce delays that currently impact business’ functionality; and to explore suitable EU-replacement funding sources.

EKOS conclusions and recommendations

A total realised expenditure of €67.1 million was realised under FA 3A, and the vast majority of this was through the FPMC. The internal scheme evaluation concluded that the FPMC scheme was valued and that there was evidence to show that the FPMC was having a positive impact on the Scottish economy, population health, and environmental sustainability – albeit these contributions were not evenly spread between different sectors.

Wider monitoring data shows that the scheme created and safeguarded 8,995 jobs – albeit this impact data has not taken account of additionality and displacement factors. Moving from gross to net values would naturally result in lowering the total number of jobs safeguarded and created by the FPMC.

According to the intervention logic, primary producers are likely to benefit from support from the FPMC scheme that operates under Measures 4 and 16, but only indirectly and to an extent that is currently uncertain.

Monitoring data and the evaluation did not focus on the issues contained in this CEQ.