Stability and simplicity: proposals for a rural funding transition period

7. Financial Context

In advance of the referendum on EU membership, a number of campaign commitments were made around protection of funding equivalent to that received from the EU should the UK vote to leave.

Following the referendum, the UK Government provided a number of guarantees for EU funding schemes. These will apply should the UK exit the EU without a negotiated agreement and implementation period in March 2019, but will not apply should the Withdrawal Agreement be agreed in full and an implementation period apply under which the UK will be able to continue to participate in EU programmes up until the end of the current Multiannual Financial Framework until 2020.

Details of the UK Government guarantees, should these be needed, are as follows:

• Scotland will receive the same level of funding that it would have received under Pillar 1 of CAP until the end of the current Multiannual Financial Framework in 2020 (scheme year 2019);
• In recognition of the fact that LFASS operates in a similar way to Pillar 1 of CAP, support for all LFASS applications made in scheme year 2019 will also be guaranteed;
• All structural and investment fund projects signed before UK leaves the EU will be guaranteed - even when those payments continue beyond the EU exit point. This includes European Structural Funds, the Scottish Rural Development Programme ( CAP Pillar 2) and the European Maritime Fisheries Fund ; and,
• Where UK organisations bid directly to the European Commission on a competitive basis while the UK remains in the EU, such as Horizon 2020, payments of awards under successful bids will be made.

If the guarantees are needed, the Scottish Government has committed to passing these on to Scottish stakeholders in full.

The present UK Government has also committed to maintaining the same cash total in funds for "farm support" until 2022, reflecting the average annual funding provided for farm support under Pillars 1 and 2 of the 2014-20 Multiannual Financial Framework. However, despite requests for more detail, the UK Government have still to clarify a number of important aspects including how "farm support" will be defined and the implications for non-farm Pillar 2 funding. Beyond this, there are no commitments or indications about what future funding Scotland will receive following the UK's exit from the EU.

The amount of support that recipients of CAP funding receive is largely determined by the available funding from Europe, which is coming to an end. The amount of future funding that Scotland receives for successor arrangements beyond EU exit will be dependent on the outcomes both of discussions between the UK Government and Devolved Administrations on the financial settlements to be made to reflect the UK's exit from the EU, and of the UK Government's 2019 Spending Review. Only when the totality of the financial impact and funding settlement to be made to Scotland is clear can decisions be taken on future policy and funding commitments.

In view of this on-going uncertainty, and without seeking to speculate on the total funding that might be available in the future, this paper utilises a working assumption that our core schemes will continue with little or no changes during a period of transition although, understandably, the level of funding attached to those schemes cannot be guaranteed. We have sought to minimise risk to Scotland's land managers by treating the UK Government's funding pledge as context rather than a solid platform on which to base our planning, and continuing to press for more certainty. Similarly, we expect the UK Government to assign to Scotland the full convergence funding awarded to the UK due to Scotland's low per hectare CAP Pillar 1 rate, but retained by the UK Government during this period.