Seafood support: letter to UK Government

Seafood Producers Resilience Fund and Seafood Response Fund

To: George Eustice MP,  Secretary of State for Environment, Food and Rural Affairs.

Thank you for discussing your new scheme, the Seafood Response Fund (“SRF”) on Monday evening. You will be well aware that we have some serious concerns about both the design of the scheme itself, and your approach to announcing it without any consultation or engagement with devolved administrations or industry in advance. Beyond the serious issue of yet again UK Government ignoring the devolution settlement by spending in a devolved area, my key focus, as I’m sure is yours, is on doing what is best for an industry that is fighting for its survival due to the combined impacts of Covid and EU Exit.

I am concerned that you do not fully understand the impact of your handling of this scheme and the real world implications that the failure to discuss and align the two schemes will have. Contrary to what you said on the call, the schemes are not complementary, but conflicting. I want to take this opportunity to set out how your approach will potentially undermine support to those you are purporting to help. I also want to outline some suggestions for how, even at this late stage, we can work together to ensure seafood producers in Scotland, and across the UK, get the best possible support.

Issues

I raised two related issues with you on our call. Firstly, because your proposed payments are structured differently to our scheme, some catching and aquaculture businesses may receive more funding under your scheme than they would under the Scottish Seafood Producers Resilience Fund (“SPRF”). Others may receive more under the SPRF. At the moment there is no basis for businesses to know which scheme would offer the highest grant support, as the information on funding and eligibility has not been published by the UK Government. A few vessels or businesses have already been paid under the SPRF. Where these businesses could have been able to access higher levels of funding under your scheme they have now irredeemably lost out through no fault of their own. Other businesses may be forced to choose whether to receive more funding at a later date or receive a smaller SG payment now. It is also not clear when your scheme will make payments, but we understand it will not be before the end of March, Perversely, this will disadvantage those businesses with the lowest levels of reserves as these are the businesses who can least afford to wait. They are being forced to accept a lower payment now or wait for a higher payment in the future, by which point anecdotally we hear some may have gone out of business.

Secondly, there are issues arising as a result of the confused approach to the payment cap. We understand that payments under your scheme will be no higher than £10,000; however, this cap may be brought down if your scheme is oversubscribed. There are some businesses who will be eligible for between £8,000 and £10,000 under the SPRF, but may be eligible for more funding under your scheme. A vessel in this situation will have to take a gamble. If they claim from the SPRF they will get a guaranteed payment; if they wait they may get slightly more funding from your scheme; or the cap may be reduced and they may get less funding. This would be comical if we were not talking about payments that may be the difference in whether a business survives this difficult period.

Next Steps

I hope that in the light of these serious real world concerns, and even at this late stage, you will work with us to see if we can jointly address them. I can see a number of potential steps to help improve matters for businesses in Scotland and across the UK.

In the first instance it is essential, subject to your consideration of the suggestions I make below, that you publish the levels of grant as soon as possible. This would help businesses in Scotland make informed decisions on how to proceed, and would mean we could recommence payments under the SPRF which we have delayed in order not to disadvantage Scottish businesses through no fault of their own. Secondly, I think you must accept that the potentially variable cap on the scheme must be eliminated, and you should set the maximum payment for your scheme at a guaranteed level, be that £10,000 or some lower rate. I understand that, like me, you have received representation from the industry asking us to work together to ensure that businesses can make an informed decision about applying, this is not possible until the funding levels under the SRF are publically available.

In order to ensure that businesses in Scotland do not miss out as a result of the combination of the schemes, I can see two potential approaches. The first would be to harmonise the payments under both schemes. Our vessel payments are based on fixed costs calculated by segment. This means that we can reflect the higher costs of certain fisheries. The fixed costs in the shellfish segments are lower than that for whitefish, which is why your grant levels are currently higher than ours – risking some businesses receiving payments significantly in excess of their costs, which in my view is a poor use of public funds. If you segmented your payments along the same lines then we could ensure that there were no vessels who are eligible under our scheme who are better off under your scheme. This would allow all those vessels to apply for our scheme to receive their money earlier, and eliminate the need for the Marine Management Organisation to process applications from the c. 1000 vessels captured by our scheme. The overall cost (less of course the saving you are making because of our scheme) would be the same, and your support for the higher costs of the whitefish sector would be more targeted.

Resolving these issues in aquaculture businesses may be more complex, as you have chosen a very different approach to ours, this just underlines the need for very close working between our officials to understand the implications of the scheme. For these discussions to be worthwhile I would be grateful if you could indicate that you would be able to modify your scheme for aquaculture businesses if doing so would improve our ability to provide coherent and complementary support, and ensure that aquaculture businesses are not disadvantaged.

An alternative approach to this would be to allow vessels who have received funding under our scheme to benefit from the SRF, but for the amount received from the SPRF to be deducted from the SRF grant payment. This would ensure vessels in Scotland would not lose out and reduce confusion and risk of duplication of payments. I would of course instruct my officials to work closely with you to facilitate such an approach.

Fiscal implications

I also raised the wider fiscal situation in our call. Whether you continue with your current model or adapt it to complement the Scottish scheme, you will find that payments under your scheme are reduced in Scotland compared to our share of the fleet because applications are diverted to our scheme. Once we have completed processing applications made to the SPRF, we will consider how much might have been paid out to the businesses in receipt of an SPRF grant if they had applied to your scheme. As you will be aware, the Scottish and UK governments have established a principle elsewhere that direct policy spillover effects such as this should be accounted for under the Fiscal Framework, and I would be grateful if our officials can work on a proposal for our agreement to resolve this.

This assumes you insist on running a scheme in Scotland directly, rather than working with the Scottish Government, it would of course be far simpler for the UK scheme to be withdrawn (from Scotland) and appropriate funding passed to the Scottish Government, with which our scheme could be expanded/reopened, to provide support to a greater range of vessels and businesses, and of course build on our expertise in delivering such funds in Scotland.

I hope I have been sufficiently clear about my concerns around the way the UK scheme has been handled to date, but I also hope you will now take our offer to work with you seriously. It is not too late to resolve these issues, but we can only find a satisfactory resolution by our administrations working together, not against each other.

I do welcome any additional funding to support the Scottish Seafood sector even so belatedly. Now we need to ensure the money available is spent as effectively as possible, regardless of which government is providing it, in order to maximise the benefit to the sector, and to ensure good use of public money.

The Scottish Seafood Exports Taskforce was set up as a forum for collaborative working across UK and Scottish governments. While it is frustrating that advanced notice of your new scheme could not have been provided through this forum, hearing your update on challenges I have highlighted should be a priority area for discussion at this week’s meeting, further more I would be happy for the proposals being made in this letter to be discussed at that forum.

I am copying this letter to Lesley Griffiths, Welsh Minister for Energy, Environment and Rural Affairs; and David Duguid Parliamentary Under Secretary of State in the Office of the Secretary of State for Scotland.

Yours sincerely,
Fergus Ewing