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

7. Focus Area 2A

Introduction

This chapter answers the evaluation question related to FA 2A.

CEQ 4: To what extent have RDP interventions contributed to improving the economic performance, restructuring and modernisation of supported farms in particular through increasing their market participation and agricultural diversification?

Contribution to FA 2A

Public expenditure

Eight SRDP 2014-2020 schemes were programmed to contribute to FA 2A. In addition, there were on-going commitments from the 2007-2013 Programme for the RP and LMO schemes.

Committed expenditure was €304.3 million and realised expenditure was slightly higher at circa €307.9 million, see Table 7.1. Public expenditure was recorded against six Measures programmed under FA 2A.

Table 7.1: Summary of public expenditure realised under FA 2A

Scheme	Expenditure	Percentage of total public expenditure realised under FA 2A	Proportion of total scheme public expenditure realised under FA 2A
LFASS	€236,416,387	76.8%	50.0%
CAGS	€22,575,317	7.3%	100.0%
NECGS	€15,685,404	5.1%	100.0%
RP	€14,880,249	4.8%	6.1%
FAS	€8,236,784	2.7%	39.9%
KTIF	€6,794,044	2.2%	84.9%
FGS	€1,659,253	0.5%	0.7%
NESUG	€617,691	0.2%	100.0%
SFGS	€548,092	0.2%	100.0%
LMO	€464,453	0.2%	1.5%
Total	€307,877,674	100%	20.9%

Source: Scottish Government, Annual Implementation Report, 2023.

Points to note from the AIR 2023 include that under FA 2A:

• around three-quarters of both the committed and realised expenditure was on Measure 13 (Payments to areas facing natural or other specific constraints) – this was delivered solely through LFASS.
• the majority of the remaining committed (16%) and realised (18%) expenditure was on Measure 4 (Investments in physical assets) - this was predominantly delivered by three capital grant schemes (CAGS, NECGS, SFGS), and by on-going commitments made under the previous programme period for RP and LMO that supported investment in restructuring or modernisation to agriculture holdings in the 2014-2020 Programme period.

The data confirms a high level of committed and realised expenditure for all six Measures under FA 2A. Points to note include that:

• for Measure 1 (Knowledge transfer and information actions), Measure 2 (Advisory services, farm management and farm relief services) and Measure 6 (Farm and business development) the committed expenditure is more than the overall planned Programme expenditure for these measures under FA 2A – in part this may be due to committed expenditure not always ultimately equating to realised expenditure.
• the realised expenditure for Measure 4 is marginally higher than planned expenditure – small differences may be the result of different exchange rates between Pounds Sterling and Euros used for the expenditure figures.

Performance indicators

A summary of the outcomes achieved under FA 2A is provided in Table 7.2 and Table 7.3. While Table 7.2 provides a cumulative summary of outcomes, Table 7.3 shows detailed annual performance of outcomes O4 and O5.

Table 7.2: Summary of performance against FA 2A

Outcome	Description	Result
O1	Total public expenditure	€307,877,674
O2	Total investment	€334,478,471
O3	Number of actions/operations supported	9,157
O4	Number of holdings/beneficiaries supported	11,786
O5	Total area (ha)	1,173,517
O11	Number of training days given	20,223
O12	Number of participants in training	17,620
O13	Number of beneficiaries advised	12,416
O14	Number of advisors trained	245
O16	Number of EIP operational groups supported	19
O17	Number of cooperation operations supported (other than EIP)	1

Source: Scottish Government, Annual Implementation Report, 2023.

Table 7.3: Annual summary of outcomes O4 and O5 performance against FA 2A

Year	O4 Number of holdings/beneficiaries supported	O5 Total area (ha)
2014 and 2015	6,881	1,152,425
2016	4,161	831,125
2017	5,961	1,133,431
2018	5,927	1,063,816
2019	6,567	1,182,670
2020	6,296	1,117,486
2021	5,968	1,057,179
2022	184	41,393
2023	2	0

Source: Scottish Government, Annual Implementation Report, 2023.

There is also one target indicator and one Programme specific target under FA 2A.

The target indicator is the percentage of agriculture holdings that received support for investment in restructuring or modernisation. This was delivered under Measure 4 by SRDP 2014-2020 schemes (CAGS, NECGS, SFGS), and by 2007-2013 Programme scheme commitments (RP and LMO). The AIR 2023 shows that:

• 5,259 agriculture holdings received support for investment in restructuring or modernisation by the end of the 2014-2020 Programme period – the main scheme contributor was CAGS (71% or 3,759 of agriculture holdings supported).
• the 5,259 agriculture holdings supported is 10.05% of the total number of agricultural holdings - the target to support 16.35% during the Programme was not achieved (61.47% achieved).
• various factors affected the ability to achieve this target – for example, the estimated spend per holding, which was originally based on data from the 2007-2013 Programme, was estimated to be too low.
• the planned output indicator was therefore reduced during the programming period to support 5,257 agricultural holdings – the revised target was achieved by the end of the 2014-2020 Programme.

Achievement against the revised (lower) target for agriculture holdings supported was made despite challenges resulting from external factors (including unforeseen factors), which not only increased project costs but also impacted on project delivery timescales and business confidence. The main challenges reported by those involved in scheme delivery were the: outcome of the UK EU Referendum in June 2016 and the lack of clarity from UK Government on the timescale; method of exit and funding; COVID-19 pandemic; rising inflation rate; war in Ukraine; and cost of living crisis.

The Programme specific target under FA 2A is the number of participants trained under Measure 1 (Knowledge transfer and information actions). Under FA 2A, Measure 1 was primarily delivered by the KTIF, and as noted above, there were also some on-going commitments from the 2007-2013 Programme. The AIR 2023 reports that:

• 17,620 participants were trained under FA 2A by the end of December 2023 - individuals can be counted more than once, for example, if they participated in more than one training event.
• the original target was amended to 17,620 participants trained (eighth Programme modification) - the revised target was achieved in full.
• almost all participants (98% or 17,320) were trained through the KTIF – of which 67% were trained due to commitments made under the SDS predecessor scheme.
• the remainder of participants (2% or 300) were trained as a result of other on-going commitments from the 2007-2013 Programme (RP and LMO).

While the data is limited to just three of the schemes programmed under FA 2A, the external evaluation of the Capital Grants Schemes (EKOS Ltd, August 2024) attributed an uplift in sales per full-time equivalent (FTE) on supported farms from £5,757 pre support to £14,546 two-years post support, reporting an increase of £8,789 or 153%.

Data from other schemes are not available at the time of writing on the change in agricultural output on supported farms/AWU (Annual Work Unit) (Result 2 indicator)^[9] or on the economic farm size structure of supported farms. So, the above analysis represents only a partial assessment.

However, interviews with staff responsible for some of the schemes, or written submissions from them, suggest that schemes funded from the relevant Measures have contributed to improving the economic performance, restructuring and modernisation of supported farms, in particular through increasing their market participation and agricultural diversification.

Wider commentary at a SRDP scheme level

Crofting Agricultural Grant Scheme

The SG has a long history of investing in crofting to improve its economic condition - CAGS is a well-established scheme which predates the SRDP 2014-2020, and under the SRDP 2014-2020 the scheme opened in 2014-2015.

Public expenditure for CAGS was programmed under FA 2A (7.3% of total expenditure under this FA), and more specifically almost all (99.998%) was under Measure 4. A very small amount (0.002%) was achieved under Measure 16 (Cooperation).

Almost all of the CAGS funding was used to support investments in agricultural holdings with a limited amount used for investments in infrastructure related to development, modernisation or adaptation of agriculture and forestry.

The external evaluation of three SRDP capital grants schemes (August 2024) presents findings applicable to the three capital grant schemes (CAGS, NECGS, SFGS) as well as points of relevance to each grant scheme. The evaluation is limited in the sense that it was not possible to analyse the beneficiary survey responses by individual grant scheme. Most survey responses (81%) were from crofters in receipt of grant funding from CAGS.^[10] Key findings to help answer the CEQ are presented below.

Stakeholders consulted as part of the capital grants schemes evaluation, including those involved in scheme delivery, agreed that CAGS is a much needed and appropriate intervention given crofting’s integral role and contribution to life within fragile regions and rural communities in the Highlands and Islands.

Stakeholders confirmed that the grant scheme helps to secure the future of crofting and maintain populations in rural communities – and does this by helping crofters to live and work sustainably on Scotland’s land and by supporting more local food production. There is considered to be a clear and strong rationale for interventions like CAGS. Crofting is viewed by stakeholders as integral to the cultural heritage of Scotland and has an important place within agriculture and food production.

Stakeholders identified the range of challenges crofters face, including that crofting exists in areas where agricultural production and investment costs are traditionally high, that many crofters often have a small parcel of land, the quality of land can also be poor, and crofters can face increased costs of doing business (higher transportation costs due to geographic location of the croft).

Stakeholders considered capital grant support a critical enabler for crofters to undertake infrastructure development and modernisation activity to help improve their crofts, reduce production costs, and support the financial viability and sustainable development of crofting more widely, albeit many are not operating as commercial farmers. Indeed, the grant recipient survey found that a sizeable proportion of beneficiaries (59%) have other forms of part-time or full-time employment in addition to their croft or farm.

The external capital grant schemes evaluation concluded that CAGS is a very popular grant scheme, and that based on applications submitted and approved, demand for capital grant support remains strong. The scheme is well-known among the crofting community - almost all approved projects were in Less Favoured Areas (LFA), and CAGS had the highest estimated repeat business across the three capital grant schemes evaluated (a high level of repeat custom). Approximately 50% of approved applications were for unique ‘businesses’ and approximately 60% recipients received one grant.^[11] Based on this, the CAGS has supported around 12% of crofts - this is likely to be an under-estimation given that some crofts on the Crofting Commission’s Register of Crofts may not be active and/or lived on.^[12]

The evaluation found that CAGS has supported the right types of investment in physical assets in line with the scheme’s purpose. Scheme monitoring data shows that the most common project supported was the planting of shelter belts and the provision of fences, hedges, walls, gates, or stock grids (42%). This was followed by, but to a lesser extent, the erection or improvement of agricultural buildings and shelters for the temporary housing and sheltering of out-wintered livestock (18%), and provision or improvement of equipment for the handling and treatment of livestock (10%).^[13]

Grant recipient survey feedback from crofters (and farmers) presented in the evaluation of capital grant schemes was largely positive. Note - the survey was undertaken across all three capital grant schemes, not only CAGS but also NECGS and SFGS.

Selected survey findings include that:

• all farmers and crofters except one who answered the question on benefits (99%) reported at least one benefit achieved as a direct result of the grant support - by far the main benefit reported (from a pre-defined list) was improved stock control (83%), followed by improved hygiene conditions and animal welfare standards (56%), improved grassland management (52%), reduced production costs (44%), and improved quality of production (44%).
• almost all farmers and crofters (95%) who answered the question on business outcomes reported the achievement of at least one outcome as a direct result of the grant support - the main outcomes reported (from a pre-defined list) were reduced livestock mortality (53%), extended grazing periods (50%), and reduced labour input (48%).
• additionality of the grant support was high - 81% of farmers and crofters who reported outcomes (but not necessarily quantified outcomes) as a direct result of the grant support said that none or less than half of the outcomes would have happened if they did not get the capital grant funding.

The evaluation concluded that access and eligibility criteria may need amended for CAGS to increase reach and engagement with crofting households – and SG is considering widening the scope of the CAGS to allow those crofters who are not engaged in agricultural activities to apply for grant funding.

Many farmers and crofters used agents to complete the application for capital grant funding, and the evaluation concluded that this may disadvantage others from applying to the scheme if they cannot afford to do this. Farmers and crofters also reported that it can be restrictive to complete some project types within the specified one financial year timeframe (for example, due to poor weather conditions, difficulties finding contractors), and the CAGS monitoring data confirms that many project extensions were approved by SG.

Various other aspects of the application and claims process attracted lower levels of satisfaction from grant recipients, including maximum individual award size, ease of completing application forms, providing supporting evidence (the required number of quotes), and time taken to receive a decision on application as well as to receive grant payment. Most notably, almost 60% of farmers and crofters who responded to the survey disagreed or strongly disagreed that it was easy to source the funding upfront to pay for the capital item before the grant could be claimed.

All of these issues can act as barriers to participation in CAGS (and the NECGS and SFGS).

CAGS has supported a diverse range of capital projects and grant recipient survey feedback confirmed that this included activity to replace old, dilapidated, neglected, or derelict provision with more modern, bigger, and/or fit-for-provision. Some crofters also reported that they had created much needed new fencing in previously unfenced areas to ensure fields were stock proof. All of this activity contributes to the modernisation of supported crofts. CAGS expenditure was, however, much more likely to have been used for support for investments in agricultural holdings rather than for investments in infrastructure related to development, modernisation, or adaptation of agriculture.

The grant support made some quantifiable impact on the economic performance of supported farms and crofts.

The capital grant schemes evaluation reports that the grant support increased annual work units (FTE) employment by 75 (2-years post project completion), increased the value of sales by £62.5m (2-years post project completion), and increased the value of stock by £19.2m (2-years post project completion.

The part played by CAGS on restructuring was limited – this was expected to be addressed through two SRDP new entrants’ schemes – the New Entrants Start Up Grant Scheme (NESUGS) and the NECGS.

The grant recipient survey found that diversification was not a significant driver of CAGS project activity – and therefore the impact of the scheme on agricultural diversification was limited. The main drivers of project activity were reported as to:

• preserve and improve the natural environment, hygiene conditions and animal welfare standards (71%).
• improve quality (68%).
• reduce production costs (56%).
• promote the diversification of farm/croft activities (17%).

Further, only 7% then reported increased diversification as a benefit achieved as a direct result of the capital grant support. However, 24% reported business growth, and 6% introduced new crops.

Farm Advisory Service

The FAS had a realised expenditure of circa €8.2 million under FA 2A (2.7% of the total).

The FAS team reported that the service received limited demand for restructuring support until latter years of the SRDP scheme - in the main restructuring is taken forward by individual farmers and crofters.

Some specialist advice was delivered under the FAS one-to-one service as part of the support provided for integrated land management along with advice and support on the provision of carbon audits. An example of this is where findings from a carbon audit indicated that farm restructuring was required in some way to improve results. Some farmers were interested in restructuring, some were interested in creating biodiversity, while others were interested in diversification. The enhanced AIR 2018 reported that advice to farmers and crofters on restructuring accounted for circa 15% of the total advice provided.

Depending on the area of interest specialist advice was provided rather than standard or generic advice. Data on the nature of advice provided was not collated.

Evidence for significant farm restructuring is limited. In some cases where beneficiaries sought advice to improve performance, they have changed enterprises and restructured their business.

Further, the impact of major restructuring on improved economic performance also takes time to be realised.

FAS has played a key role in improving economic performance of farms. The FAS essentially provided advice, guidance, and specialist knowledge to drive forward efficiencies through Integrated Land Management plans and an array of specialist advice. Feedback from farmers in the One-to-One Service Evaluation suggested access to specialist and bespoke advice is essential in improving economic performance. A total of 79% of respondents reported they were somewhat or very satisfied with the FAS support they received.

The enhanced AIR 2018 noted that increasing profitability of farms and crofts in Scotland was a clear aim of the FAS, with a focus on technical and environmental performance designed to build resilience in all beneficiaries in order that these businesses can be financially and environmentally sustainable and viable.

The economic performance of farms was expected to have improved through the activities of the FAS interventions, such as knowledge transfer. Farm business income measures are reported annually but are also said to be heavily influenced by external factors such as exchange rates, weather, global market forces, and of course pandemics and war.

When collecting evidence for the ex-post programme evaluation the study team were told by SG officials that beneficiaries are asked whether they intend to make changes in their businesses, but it is not known whether they then make the changes. This is easier to follow up for one-to-one advice than it is for one-to-many advice.

Building resilience in modern farming businesses is a key aim of the FAS and this is expected to lead to improved financial performance in supported farms. Modernisation on individual units has taken place where there was uptake of new practices following the demonstration of new techniques on demonstration farms and focus farms. Some practices were straightforward; others involved more fundamental changes in the business, particularly in terms of enterprise management and structure.

The FAS encouraged market participation by providing significant volumes of market data to the industry which was accessible to all via the FAS website. According to an SG official, this improved market intelligence, both in terms of product and inputs and improved market participation, though this cannot be evidenced definitively (reliant on stakeholder self-reporting).

Agricultural diversification was excluded from the delivery of the FAS as it was dealt with under other delivery aspects of the SRDP. For example, diversification into woodland was supported by the FGS (Measure 8). The SG provided a steer to the deliverer of FAS one-to-many activities (SAC Consulting) to focus on primary agricultural production rather than diversification (and product branding).

The impact on economic performance (and other aspects of change) was captured in the FAS one-to-one advice monitoring system. This comprised a feedback form, and payment was not made until the completed form had been submitted by the farmer.

The impacts, reported as intensions (not actuals achieved) by farmers, is sub-divided into that for Integrated Land Management Plans, specialist advice, Carbon Audits, and mentoring, and reported within Annual Reports submitted to the SG.

The contract for one-to-one advice did not include following up beneficiaries (after six months or so) to investigate the actual impact resulting from the advice received. However, in the SG commissioned evaluation of the FAS one-to-one support delivered via a follow-up telephone survey in 2019 (Winning Moves) beneficiaries were asked whether they had made the changes that they said they would. Equally, Carbon Audits also set out actions which farmers need to undertake, which could have been followed up but were not.

An internal evaluation of the FAS one-to-many service (Scottish Government, 2021) found that SAC Consulting had delivered a wide ranging service that fulfilled their requirements. Benefits included a large number of events, high satisfaction among attendees and increased use of FAS services over the contract period. However, the evaluation noted that demonstrating the impacts of the one-to-many service on farms was challenging, as there was limited monitoring of both the extent to which farmers used the service and of on-farm improvement. Recommendations included: identifying outcome-based measurements to demonstrate the impacts of advice; improving the monitoring of FAS use among farmers; refreshing the ‘mission’ of the service; and developing techniques to improve the engagement of those currently not making use of FAS and to support on-farm changes among those facing barriers to doing so.

The SG commissioned evaluation of the one-to-one FAS advice services (2019) also found relatively high levels of satisfaction with the one-to-one service. It was perceived to offer high quality, practical advice. Further, the scheme evaluation found that the FAS seeks to improve the benefits farmers and crofters achieve through taking recommended actions. Reported benefits were wide-ranging and included business performance benefits such as increased profitability, the creation and restructuring of businesses, creation and safeguarding of employment, and various environmental benefits. Whilst the sample who received mentoring support was small (reflecting the small proportion of farmers who had been supported in this way by the FAS), the evaluation found that a high proportion derived a range of benefits from the mentoring support received.

The majority of survey respondents struggled to identify other support they would like or improvements to the FAS. Where mentioned, suggested areas for service improvement included:

• improved marketing of the service.
• less paperwork in the provision of the service.
• more specific, detailed, relevant advice – and more specialist advisors.
• greater accessibility of the service (for example, location, format of support).
• speed of service.
• more follow-up (aftercare support).

Forestry Grant Scheme

The FGS had a realised expenditure of circa €1.6 million under FA 2A – this represents a very small proportion of the total realised expenditure under this FA.

The FGS delivered two specific grants streams that directly contributed to improving the economic performance, restructuring and modernisation of supported farms - the Harvesting and Processing Grants and the Woodland Creation Grants. These grant schemes provided support for new access infrastructure that would bring small scale, undermanaged or inaccessible existing woodlands back into active management and to:

• improve the economic value of forest and woodland through timber production.
• increase the area of woodland in Scotland that is in sustainable management.
• improve the environmental and social benefits of woodland.

A Scottish Forestry official told the evaluators that in order to determine whether support will be granted, a judgement had to be made on the relative value of the timber made available and the cost of the access road. A positive decision was more likely if the road was short.

No monitoring system was put in place to capture and report on the benefits and impacts arising from the supported farms. Scottish Forestry officials reported that this was not considered proportionate given that the impact on the farm business was likely to be small. Further, the decision to invest was not based on the anticipated impact of the business, but as noted above, on other criteria related to timber values and the cost of making access feasible.

The Sheep and Trees initiative supported by Scottish Forestry, NFU Scotland and the Scottish Sheep Association was aimed at helping land managers identify the many opportunities woodland creation can bring to support and develop their existing farm enterprises. This initiative worked in partnership with Scottish Forestry to signpost farmers to FGS for support in achieving mutual objectives of improving the economic performance, restructuring and modernisation of farming by increasing their market participation and agricultural diversification.

Less Favoured Area Support Scheme

The Less Favoured Area Support Scheme (LFASS) had a realised expenditure of circa €236 million under FA 2A – this represents the largest expenditure under this FA (76.8%).

According to the LFASS evaluation (SG, 2016) agricultural abandonment of land has potential implications for commodity production, rural communities and environmental conditions.

Although the pattern is uneven, agricultural census data and LFASS payment data indicate that abandonment has occurred in recent years, predominantly on poorer quality land and in more remote areas, both at field level and whole farm level.

The LFASS helped avoid the risk of land abandonment by protecting fragile remote areas in order to keep people living and working on that land. LFASS directly contributed to the maintenance of eligible land and its ecology. This ensured businesses that operated on this land were viable.

LFASS covers the additional farming costs for remote and fragile areas to bring their products to market such as island ferries and long-distance transport for example that other areas are either not constrained by or in a significantly less way.

The LFA payment does not lead directly to farm modernisation as the scheme payments do not come with a lot of extra conditions in addition to the land eligibility criteria. However, the financial support is used in a uniquely bespoke way by the farmers in order to farm effectively and productively on their LFA land, geography, and climate. Consequently, the support improves economic performance of the land and the businesses its supports.

As part of the scheme evaluation a stakeholder representing crofters pointed out that “LFASS enables crofts to survive so without it, many crofts would not be able to operate and thus contribute to improving the economic performance.”

Knowledge Transfer and Innovation Fund

The KTIF had a realised expenditure of circa €6.8 million under FA 2A – this represents a small proportion of the total realised expenditure under this FA (2.2%).

The KTIF supported 27 EIP operational groups . Examples include the Scottish Dairy Business Impact Groups (AHDB Dairy) and the Livestock Development Programme (ANM Group). Supported projects often have impacts across more than one FA. Important to assessing impact, each KTIF project provides interim and final reports which provide commentary on performance metrics; the 2022 summary report on project progress has been made available to the evaluators by the SG.

Only one project appears to have been completed, Future Farming Scotland, delivered by Soil Association Scotland (and partners), and this has been subject to an independent evaluation. The focus was on knowledge transfer and inter alia and the evaluation concluded that there was strong evidence that participants had increased their knowledge, abilities/skills, and confidence of sustainable land management practices.

The annual summary reports will be a source of (at least some) quantitative results in time. Most KTIF projects supported through the SRDP 2014-2020 were three to four years’ duration, and there is also a lag time before benefits (impacts) will be seen. Since this time, projects supported by domestic funds are restricted to annual timeframes for delivery due to budgetary constraints.

The view of the Soil Association Scotland was that, for the KTIF projects it administers, that they have enhanced economic performance. Projects promote the reduced use of externally purchased inputs (including synthetic fertilisers, feed concentrates, etc.) by increasing recycling, re-use, and efficient management of existing on-farm resources.

While there are no specific economic figures, anecdotal evidence was available through case studies in the Soil Association Scotland Farming for the Future: Our work in Scotland Report (2019). This report demonstrates how farmers participating in KTIF projects have managed to reduce their costs.

The Monitor Farm Programme (administered by Quality Meat Scotland/AHDB) was assessed during the previous programming period and that evaluation was used to inform the design and implementation of the SRDP 2014-2020 Monitor Farm programme.

New Entrants Capital Grant Scheme

The NECGS became operational in 2015 and closed to new applications in August 2018 due to available EU and SG match-funding being fully committed. The scheme was designed to provide capital grants for people new to farming to make improvements to their agricultural business and to help promote sustainable development.

All public expenditure for NECGS was programmed under FA 2A (5.1% of total expenditure under this FA) and Measure 4, and similar to CAGS and SFGS, almost all was used under sub-measure 4.1 to support investments in agricultural holdings rather than sub-measure 4.3 to support investments in infrastructure related to development, modernisation or adaptation of agriculture and forestry.

Stakeholders consulted as part of the three capital grants schemes evaluation (August 2024) agreed that NECGS is a much needed and appropriate intervention as it helps farmers to live and work sustainably on Scotland’s land – thereby attracting and retaining farmers and crofters to live and work on the land in remote and rural communities and supporting more local food production. The rationale for intervention was clear and understood, and stakeholders identified the range of challenges new entrants to farming and crofting face, including but not limited to:

• access to capital (lack of resources) to purchase inputs and the cost of equipment can be prohibitive.
• the high average age of farmers and crofters – a growing ageing workforce.
• the lack of new entrants to the sector - for example, not considered an attractive career choice, long working hours.
• access to land barriers for new entrants to get a foothold in the sector (land prices, land availability, and wider issues relating to quality of land) and wider structural constraints (around economic viability and profitability).

Stakeholders involved in scheme delivery considered capital grant support a critical enabler for new entrants to help people get started and to undertake infrastructure development and modernisation activity – not least as it can take years for a farm business to become profitable. Stakeholders said that the NECGS was an important component of the wider offer available from SG for new entrants, and that the NESUGS and Young Farmer Start Up Grant Scheme (YFSUGS) provided a pipeline of potential applicants to the NECGS.

There was unanimous stakeholder feedback that capital grant schemes (and other forms of support) are vitally important to attract and retain more new and young entrants into farming, including supporting younger people into agriculture to keep the industry alive.

The AIR 2023 notes that the NECGS supported 850 agricultural holdings. The external evaluation concluded that NECGS is a very popular grant scheme, based on the number of applications submitted and approved.

Data for 2018-2019 shows that vast majority of approved NECGS projects were: in LFA (90%); from new entrant farmers (80%); from applicants classed as either a young farmer, or would be head of holding within five years, or both (91%).^[14] Approximately 80% of approved NECGS applications were for unique ‘businesses’, and approximately 80% of grant recipients received one grant.^[15]

The schemes’ evaluation found that the NECGS has supported the right types of capital projects in line with the scheme’s purpose. A wide range of projects were supported, with scheme monitoring data showing that the most common projects supported were the:

• erection or improvement of agricultural buildings, and shelters for the temporary housing and sheltering of out-wintered livestock (38%).
• provision or improvement of facilities for the organised feeding of out-wintered livestock, including permanently fixed troughs and feed barriers, and associated concrete bases (27%).
• planting of shelter belts and the provision of fences, hedges, walls, gates or stock grids (20%).

Grant recipient survey feedback from farmers and who received funding from the NECGS presented in the three capital grants scheme evaluation was largely positive. Most survey responses were from crofters who had received grant funding from CAGS - 23 responses relate to the NECGS.^[16]

Note: the messages from the survey described earlier in this chapter under CAGS are applicable to the NECGS. This includes aspects of the scheme which worked well, less well, benefits, qualitative impacts, and the extent to which the grant scheme supported the economic performance of supported farms, modernisation of supported farms, and agricultural diversification.

The part played by NECGS on restructuring was limited and is more evident through schemes such as NESUGS and YFSUGS. All three schemes provide grants for new entrants, but for different purposes.

The SG distinguishes between ‘genuine new entrants’ and new entrants taking over a family business - and its intention through the NESUGS was to support genuine new starts – this scheme was aimed at those who started their agricultural business in the last 12 months (that is, starting an agricultural business for the first time). The YFSUGS was aimed at those who were starting an agricultural business for the first time or who were taking over an existing agricultural business and the appraisal process gave greater weight to those setting up a business for the first time.

The general feedback from stakeholders was that most approved applications for the NECGS were from those who had taken over control of an existing business and not from those who had started an agricultural business for the first time. Further, many NECGS applicants (and grant recipients) appeared to have restructured long-established, often large farming businesses or changed partnership arrangements to become eligible for grant support. While some stakeholders felt that this was not a significant issue or concern (succession planning argument) others felt that the NECGS had possibly missed the mark in terms of supporting its intended audience.

While there was stakeholder feedback that the NECGS may not have supported genuine new entrants there is, however, no data available from approved applications to fully evidence this. Evaluation survey feedback (albeit not only for NECGS) shows that 14% of grant recipients who responded to the survey reported that they had no family background in farming or crofting, agricultural qualifications, or previous work in the industry.

New Entrants Start-Up Grant Scheme

Under FA 2A, public expenditure for the NESUGS was programmed under Measure 6 (Farm and business development), and all was under sub-measure 6.3 (Business start-up aid for the development of small farms). Circa €618,000 expenditure was incurred for the NESUGS - this equates to 0.2% of the total public expenditure incurred under FA 2A.

The NESUGS provided grants to those who started their agricultural business in the last 12 months. To be eligible for this grant support, applicants also had to: be over 16 years of age (there was no upper age limit); have access to a minimum of three hectares of land; and have a registered business with the SG. Beneficiaries were also signposted to advice under other aspects of the SRDP.

The scheme was designed to help overcome barriers to entry and attract talented people to agriculture - a key priority for the SG. The main concerns relate to a lack of new entrants to the sector as well as the high average age of farmers (in Scotland, 64% of male and 60% of female farmers are over 55 years old). Encouraging a new generation to farming was reported by stakeholders interviewed as part of the ex-post evaluation to be vital if Scotland is to maintain vibrant farming and crofting sectors. Indeed, the NESUGS was one of three SRDP schemes developed to support new entrants (the others were the YFSUGS and NECGS).

The first round of applications for the NESUGS was in 2015 with contracts issued in 2016. The final round of applications was in 2017 and the last co-financed payments were made in 2020.There was no budget for second instalment claims for NESUG after 2020 so these were paid until 2023 using domestic only funds.

Capital grant funding could be used towards the costs associated with starting up an agricultural business (for example, purchasing land, equipment, machinery, or livestock, or constructing buildings or infrastructure). The grant payments were made in two instalments, with the first instalment made via a claim once arrangements were made to purchase the necessary start-up materials. The second payment was provided on achievement of the milestones set out in the business plan. The payment structure made these schemes different to other SRDP capital grant schemes, and supported cash-flow issues. It was also possible for beneficiaries of the new entrant schemes to apply for capital grants (for different projects) through the SRDP providing potential synergies.

A joint evaluation of the NESUGS and YFSUGS was undertaken (SG, 2022), given the similarities of both schemes. The aim of the evaluation was to examine the extent to which the schemes contributed to achieving their intended aim to attract a new generation of farmers in agriculture. The methodology comprised a data review, literature and policy review, and an online beneficiary survey. The evaluation report largely outlines findings of relevance to both schemes although some findings are unique to each individual grant scheme.

The literature and policy review undertaken as part of the evaluation summarised the existing evidence base on the main challenges facing new entrants in the farming sector (and these challenges were also confirmed through the beneficiary survey). The schemes’ evaluation concludes that the main barriers facing new entrants are:

• gaining access to capital.
• access to farmland with which to develop a business - this reflects factors such as demand exceeding supply, competition for plots, and high land prices. Tenancy availability has also substantially declined over recent decades - limited incentives for large landowners to sell their land, alongside considerable competition for the limited available land from investors, other farmers and non-farmers seeking alternative lifestyles.
• they often struggle to make a profit - for example, due to high land prices/rental costs.
• succession and reduced opportunities for retirement - increases in life expectancy and reduced opportunities to retire have led to older farmers working longer, owning land for longer, giving less opportunities for farmers, including young farmers to enter the sector. As many farmers reside on their farm, their assets are concentrated their farm, giving them little incentive to retire and exit the industry. Without older farmers retiring and making their job roles and land available, it is increasingly difficult for young farmers to access land and enter the farming industry.

The schemes level evaluation reported that 49 grants were awarded as part of the NESUGS out of a total of 128 applications (a low approval rate of rate of 38%). The evaluation did not provide a breakdown of the characteristics of grant recipients (for example, age, gender, etc) – although some data was captured through the beneficiary survey (see below).

The grant scheme was very popular and over-subscribed, resulting in its premature closure. The scheme evaluation report notes that the low approval rate may have been due the eligibility criteria (and in particular that awards were dependent on applicants already having access to land for farming). Further, it notes demand for support was strong and there was scope for the scheme to support additional new entrants had there been less restrictive eligibility criteria and additional funds.

The schemes level evaluation undertook an online beneficiary survey of both the NESUGS and YFSUGS, and findings were combined (that is, findings were not separated out for each scheme).

The survey received 67 responses (26% response rate), and responses were relatively equally split between the NESUGS (51%) and YFSUGS (49%). A breakdown of the respondent characteristics is provided below:

• over two-thirds of NESUGS grant recipients (69%) responded to the survey.
• two-thirds of all respondents were male (67%) and 31% female.
• the vast majority were aged between 30-49 (82%) – younger than the average age of the farming population.
• around half (49%) reported having degrees or professional qualifications.
• slightly over one-quarter of the farms supported were located in the Highland local authority, followed by Aberdeenshire and the Orkney Islands - these areas are typically characterised as LFA, which indicates that the geography of the area is challenging for farming.

A summary of other beneficiary survey findings are provided below.

In terms of participant background, the sample of respondents were two-thirds male and more educated than the population at large. The sample largely reported previous farm experience - 54% of the sample grew up on a farm and 79% had either previously worked on a farm or managed a farm. The primary goals in pursuing a career in farming related to lifestyle ambitions (73%) and work ambitions (66%).

As regards land access, the majority of respondents rented their land - 42% of the sample rented all of their land, and 23% rented at least some of their land. The survey found that 39% of the sample were farming land currently or previously owned by their family.

Looking at farm types, livestock was the most common farming enterprise - 69% of the sample farmed sheep, while 62% farmed beef (participants could choose multiple options), while 8% had horticulture. The majority of the farms were small - 86% of the farms either employed no one or employed one person on a part-time basis, and 57% of the farms were under 50 hectares.

In terms of the respondents’ views of support, a total of 42% of the sample did not agree that it was easy to access information about available funding and support. The majority 63% had used the FAS. While 51% agreed that they found it easy to access appropriate training, 60% wanted more support for production going forward.

Finally, regarding the financial viability of farms, almost one-fifth (19%) of the sample reported that the likelihood they would be managing their farm in five years’ time was neutral, unlikely, or very unlikely. Profitability was reported as the main challenge (52% of the sample), and 88% regarded improving profitability as a high priority. Most farms (51%) made an annual income under £10,000 per annum, with a further 24% making less than £20,000. Excluding subsidies, 75% of farms in the sample did not make a profit, while 36% did not when subsidy was included. However, 57% believed their business would be more profitable next year.

The conclusions of the NESUGS and YFSUGS evaluation were that:

• the number of new farmers supported by the NESUGS (and YFSUGS) was relatively small and has not changed the overall demographics of the farming sector – the 254 new farmers supported by both schemes accounts for less than 1% of the total number of farm businesses and Scottish Agricultural holdings.
• the grant schemes were very popular and over-subscribed, resulting in their premature closure. Setting a target for a total proportion of farmland to be managed by new entrants going forward could result in a budget more adequate to this extensive task. The evaluation notes that an increased budget for grants such as these will not be sufficient to address the issues that prevent generational renewal in the farming sector. The extensive structural constraints facing new entrants, from land availability to the profitability of the overall pursuit, means that these efforts are blowing against the prevailing economic winds.
• there are range of structural barriers that young farmers (and new entrants) face which can make it difficult for policymakers to respond to and encourage a younger generation into the industry.

The schemes evaluation found no evidence to support the continuation of the start-up grants (as they operated in the 2014-2020 SRDP), as a method of encouraging generational renewal in the farming sector. This is not to say that supporting new entrants could not have this effect under any circumstances, but simply that this iteration of the grants had limited scope to encourage meaningful change in the age composition of the farming sector within the timeframe of the evaluation – not least given the considerable constraints of land availability and profitability.

Further, the evaluation report recommended that future efforts to support new entrants into the farming sector should explore methods to increase the circulation of farmland - facilitating more farmland going onto the market could, in turn, attract new farmers and businesses.

The schemes evaluation did not explicitly cover the extent to which the NESUGS contributed to improving the economic performance, restructuring and modernisation of supported farms in particular through increasing their market participation and agricultural diversification.

That being said, feedback from stakeholders involved in scheme delivery interviewed as part of previous enhanced AIR reports and through the ex-post evaluation note that:

• the scheme helped farmers into the industry with a focus on core agricultural activities rather than support to assist with diversification – as the farm businesses supported were starting from scratch, the scheme brought new business activity into the market and so increased market participation.
• there was no diversification element within this scheme, albeit it is possible that some supported farms diversified activities.
• the scheme was not aimed directly at improving economic performance –most business development plans for the new entrants did, however, aim to increase the standard output of farms over the business planning period.
• new businesses tend to be relatively modern.
• there has been some restructuring in aggregate for the sector through the encouragement of new entrants or through succession planning with existing businesses, but this is not related to the specific supported business.

The NESUGS overall contribution to FA 2A was therefore small and indirect.

Small Farms Grant Scheme

The SFGS opened for applications in 2015 and closed to new applications in December 2022. The scheme provided capital grants to small farmers to make improvements to their holdings and to improve business sustainability. All public expenditure for the SFGS was delivered under FA 2A, Measure 4 (Investment in physical assets - 0.2% of total expenditure under this FA), and almost all was used to support investments in agricultural holdings rather than to support investments in infrastructure related to development, modernisation or adaptation of agriculture and forestry.

The original SFGS financial budget was modified significantly during the delivery period in direct response to low uptake, and the AIR 2023 reports that only 59 agricultural holdings were supported.

The three capital grant schemes evaluation (EKOS Ltd, August 2024) concludes that: the scheme had a low approval rate; predominantly supported small value capital projects; the scheme had limited success (under-performed), largely due to scheme design and eligibility issues; but that capital grant support for business improvement and modernisation was needed by small farmers.

Stakeholders commented during the capital grant schemes evaluation that the original intent of the SFGS to provide access to capital funding to help small farmers make improvements to help sustain their businesses was appropriate - and the range of challenges faced by farmers including those who run small farms were described earlier (for example, limited access to capital, a growing ageing workforce, a lack of new entrants).

Similar to CAGS and NECGS there was considered to be an identified need for public sector support to help small farmers live and work on the land in remote and rural communities and support more local food production.

Stakeholders confirmed that the SFGS supported far fewer farmers than was anticipated at the outset. Most of the area office staff interviewed as part of capital grant schemes evaluation confirmed that scheme uptake was poor. The main contributory factor was considered to be scheme design issues relating to the eligibility criteria. The general consensus among stakeholders was that the inclusion of the income test to be financially eligible for support from the SFGS resulted in a significant proportion of ineligible applications – raising questions around intended versus actual audience or end beneficiaries. It was also said to have potentially put others off from applying for grant support from the scheme.

Stakeholders understood the original rationale for the inclusion of the income test as part of the eligibility criteria – it was considered necessary to exclude ‘hobbyists’ and those who may have had financial means to undertake the capital project in the absence of grant support, and to help target the funding more effectively at small farmers who needed it the most. Issues raised by stakeholders included that:

• many farmers (and partners if the application was for a couple) have other jobs to supplement their income from farming or crofting – this meant that total gross income for individuals/couples made many applicants ineligible.
• some applicants were reluctant to provide the supporting evidence required to show total gross income (for example, payslips, etc.).
• the income test was unique to the SFGS and was not applied to other capital grant schemes - and was therefore an anomaly.

The evaluation found that the SFGS supported the right types of capital projects in line with the scheme’s purpose.

A wide range of projects were supported, with scheme monitoring data showing that the most common projects supported were^[17]:

• the planting of shelter belts and the provision of fences, hedges, walls, gates, or stock grids (34% of approved projects).
• erection or improvement of agricultural buildings, and shelters for the temporary housing and sheltering of out-wintered livestock (29% of approved projects).
• provision or improvement of facilities for the organised feeding of out- wintered livestock, including permanently fixed troughs and feed barriers, and associated concrete bases (15% of approved projects).
• investment in land management, including the initial grassland improvement works for the restoration of degraded land and the control of bracken (13% of approved projects).

Grant recipient survey feedback from farmers and who received funding from the SFGS presented in the evaluation was largely positive. Most survey responses were from crofters who had received grant funding from CAGS - 14 responses relate to the SFGS^[18]. Note: the messages from the survey described earlier under CAGS in this chapter are applicable to the SFGS. This includes aspects of the scheme which worked well, less well, benefits, qualitative impacts, and the extent to which the grant scheme supported the economic performance of supported farms, modernisation of supported farms, and agricultural diversification.

EKOS conclusions and recommendations

Realised expenditure under FA 2A was circa €307.9 million, with the majority delivered via the LFASS. Work is underway by the SG with stakeholders to understand the impact of LFASS and what future support for areas of natural constraint look like in terms of levels of support and scheme design and eligibility. In addition, research into the effect of cattle on LFAs productivity is being considered.

The expenditure realised under the relevant Measure has contributed to improving the economic performance, restructuring and modernisation of supported farms – in the main through increasing their market participation. Diversification was not a key driver of activity coming forward under the various capital grant schemes which contributed to this FA. However, it should be noted that diversification is supported under Measure 19 through LEADER – albeit the extent to which the schemes supported the diversification of supported businesses cannot be quantified.

An enhanced monitoring and evaluation of the FAS one-to-one service collected key performance indicator data. They are, however, mostly focused on input and output measures (for example, number of attendees/participants, number of technical notes, articles, etc.). This resulted in a significant gap in understanding the outcomes of the FAS (for example, what knowledge has been imparted and what changes have actually been made as a result) and the potential impact of the support provided to businesses. A total of 106 respondents (out of 112) reported some benefits.

The benefits are broken down by support provided and expected outcomes, including additional sales, reduced costs and increased profit. The scheme evaluation concluded that about one-third of the recommended actions would not have been taken without the input of the FAS. In terms of the benefits achieved, the FAS is mainly acting to improve the benefits farmers and crofters achieve through taking recommended actions. These benefits are quite wide-ranging including business performance benefits such as increased profitability, the creation and restructuring of businesses, creation and safeguarding of employment and various environmental benefits.

Whilst the scheme evaluation demonstrates satisfaction with FAS and self-reported benefits there is more that could be done to measure the impact and link changes from farm level up to the national picture to the FAS.

There is insufficient evidence to fully assess the schemes programmed under FA 2A against the results indicator of FA 2A, “Result 2: Change in agricultural output on supported farms / AWU (FA 2A) (EUR / Annual Work Unit)”. A partial assessment was enabled by evaluation evidence from the Capital Grants Scheme Evaluation (EKOS Ltd, 2024). Other relevant scheme evaluations could have examined this by incorporating a primary research programme surveying beneficiaries to capture data on changes in agricultural output on supported farms.