Just transition in land use and agriculture: a discussion paper

Wider socio-economic context

Land use and agriculture form part of wider rural life and its economy and a Just Transition must consider the benefits and impacts on those wider rural, island and coastal communities. This section seeks to provide a brief socioeconomic overview of rural Scotland and then specifically, the agriculture, forestry and peatland sectors.

Rural Scotland^[7]

With regards to economy and jobs, proportionately more residents of rural Scotland are in work with employment rates higher than in the rest of Scotland. Residence based estimates of pay indicate that rates are highest for accessible rural areas but lowest for remote rural areas. More residents in rural Scotland are self-employed and homeworking is more prevalent. Figure 2 shows the distribution of employment across sectors, with workers in the public sector shown as a single category.

'Agriculture, forestry, and fishing' is the sector that shows the greatest difference across Scotland, accounting for 15% of workers in remote rural areas compared to 12% in accessible rural areas and 0.5% in the rest of Scotland. The 'Accommodation and food services' sector also has a much larger share of employment in remote rural areas (15%) compared to accessible rural areas (9%) and the rest of Scotland (8%).

Community, place, people, and equity^[8]

Over 5.46 million people live in Scotland, with over 930,000 of them living in rural areas (17%). The population of rural Scotland including our island and coastal communities continues to grow at a faster rate than the rest of Scotland, driven by the increase in accessible rural areas, mainly due to inward migration.

Rural areas of Scotland have a lower proportion of the population in the age range 16 to 44 but a higher proportion of people aged 45 and over. This is particularly true for the age range of 65 and over in remote rural areas, indicating that when people reach retirement age, they are more likely to live in rural areas. Evidence suggests that factors influencing the number of young people moving out of rural areas could be higher education and employment opportunities, and the availability of affordable housing and public transport.

In terms of travel and access to services, more people in rural areas live out with a reasonable drive time to key services (e.g., GPs and shops) compared to the rest of Scotland, and fewer people are satisfied with the quality of the public transport services delivered.

Rural Housing

The Scottish Index of Multiple Deprivation – Rural Deprivation evidence summary highlights that housing stock in many rural areas is regarded as 'not fit for purpose'. This is mainly due to the lack of suitable affordable housing, modern housing and single occupancy homes. These problems have social and economic impacts on rural communities and the wider land use and agricultural sectors. For example:

• The lack of affordable housing means that young first-time buyers are priced out and have to leave the area. This out-migration of young working people increases the dependency ratio, (the number of people aged 65 or more per a hundred people aged 15-64).
• As low-income workers are unable to afford housing, small businesses and service providers which rely on a low-income workforce are unable to source staff.
• Older, larger, detached, or non-gas heated homes, which are more common in rural areas, have lower energy efficiency ratings. For example, 63% of rural households are not covered by the gas grid and use other fuel sources to heat their homes which are more expensive than mains gas. This is a larger proportion than for urban areas where just 7% of households are not covered by the gas grid.
• Rural residents incur higher fuel costs which places low-income households at risk of fuel poverty. Approximately 55% of households in Highland council area and 62% in the Western Isles experience fuel poverty.

Land ownership

The use and ownership of Scotland's land is one of the central issues for the future of our environment, our society and our economy. Addressing the historical position of large parts of Scotland being owned and used in ways determined not by the communities that live on them, but by landowners, often based out with Scotland, has been a theme of devolution since the first Parliament.

Over the years Scotland has taken significant steps forward in supporting and enabling communities to have greater opportunity to own or to influence the use of the land on which they live. The core aims of the Scottish Government's land reform policy are clearly set out in our Land Rights and Responsibilities Statement:

• to increase diversity of landownership
• to bring about changes in land use
• to create more opportunities for communities to engage in decision making about the land around them and share in the benefits it brings

Land is a vital resource that underpins the wealth, and the well-being, of our nation as a whole. Private ownership of land, particularly at scale, has in the past conferred significant prestige associated with for example hereditary titles, status, and ability to influence policy and law. While many aspects of society have become more equitable, the privilege associated with the ownership of land at scale remains and takes new forms.

The Scottish Government is committed to strengthening the role of communities via land reform because we know that transparency, ownership, and being involved in decisions about land can sustain and enhance the wellbeing and resilience of local people.

As Scotland continues on its land reform journey, addressing historical inequalities, we must also be alive to new and emerging challenges as we look to the future. For instance, the Scottish Governments recent Land reform in a Net Zero Nation consultation sought views on areas such as:

• Strengthening the Land Rights and Responsibilities Statement
• Introduction of compulsory management plans
• Ensuring the public interest is considered on transfers of large-scale landholdings
• Introduction of new requirements to access public funding for land-based activity
• Introduction of a new Land Use Tenancy
• Modernising small landholders legislation
• Increasing transparency in relation to land ownership and land use

Land in Community ownership

Recent figures^[9] show that in 2021 the area of Scottish land in community ownership was 211,998 hectares. This is an increase of 252 hectares from 211,746 hectares in 2020, and an increase of 155,439 hectares compared to 2000. Remote rural areas of Scotland account for 98% of this community owned land, with accessible rural areas accounting for just over 1%.

Natural capital and emerging markets

Scotland's natural environment or 'Natural Capital' has become more valuable than ever due to its potential to support Scotland and the wider world's journey to "net zero" and nature gain.

Both public and private investment in our natural environment will be essential in tackling the climate and nature crises and this presents a substantial opportunity for Scotland. However, the risk, increasingly understood among rural communities, is that investment could lead to an unwelcome change whereby people are secondary to large, often corporate, projects which are remote from communities, imposed on them and from which they do not benefit. This is contrary to our vision for the future of Scotland's land and its communities and to the principles of a just transition. It is why the Scottish Government has committed to the development of a values-led, high integrity market for responsible investment in natural capital in Scotland, as set out in the National Strategy for Economic Transformation (NSET) that was published in March 2022.

These principles are an important early action to support delivery of the commitment on natural capital markets. However, we understand that we must continue to ensure our communities, as well as specific groups such as tenant farmers, are in engaged in and benefit from these markets and nature-based developments.

Agriculture

Alongside the other most significant sectors in employment terms, (public sector, financial and other activities, and tourism), agriculture is an important part of the rural economy and most of Scotland's land area is used for this activity. Figures from 2018 demonstrate agricultural total output being worth £3.18 billion^[10], with our food and drink industry being the largest user of this domestically (with Scotland's food and drink industry being an important generator of wealth and employment in its own right). However, this output is highly dependent on land capability with large areas of Scotland having limited arable growing conditions or consisting of hilly or rocky land more suitable for livestock. It contributes around 0.8% of Scotland's total Gross Value Added (GVA) economic output, with this making up a larger proportion of the rural economic output. It employs around 2.5% of the total working population of Scotland, with rates varying across the country.

Farm income estimates 2021 – 22^[11]

Contributors to total average farm income can be broken down into income from agricultural activity, contracting activity, diversified activity, and support payments, (shown in figure 3).

In 202122, farms on average made a loss from agricultural activity of £5,500. This was a smaller loss than in 202021, when the average loss from agricultural activity was £12,600.

Some farm types typically make a profit on average while others make a loss. For example, in 202122, most livestock farm types made a loss from agricultural activity, while cereal, general cropping, dairy and mixed farms made a profit. LFA sheep farms made the largest average loss from agricultural activity in 202122, of around £38,000. This is against a backdrop of farm workers commonly working long hours each week.

Average incomes from support payments, contracting and diversified activities vary less than agricultural activity income by farm type. The average farm in 202122 received income of £44,600 from support payments and grants, £5,000 from contract farming and £6,000 from diversified activities.

Agricultural workforce^[12]

The total agricultural workforce is estimated to be around 67,400 workers. This estimate may not include some family members who also provide some labour. The majority of this workforce are owner-occupiers, made up of people who own or rent the farm and work on it. Of all working occupiers (occupier and spouse), 60 per cent are male and 40 per cent are female.

Statistics show that working occupiers are getting increasingly older. In June 2021, only 10 per cent of the total working occupiers were under 41 with male occupiers being generally older than female occupiers (see figure 4).

Within the total workforce, as of June 2021, there were 29,100 regular and seasonal employees working in agriculture. This is an increase of one per cent compared to 2020. However, the number of casual and seasonal workers decreased by three per cent compared to the previous year, to 8,000.

Wider impacts / benefits of Scottish agriculture

The contribution made by agriculture to Scottish society and the environment is broader than the measures captured in traditional economic indicators.

Agriculture plays an important role in rural communities, and, along with tourism and hospitality, contributes to the 'Scottish' brand, for example through the Scotch Beef or Scotch Lamb Protected Geographic Indication (PGI), from the Quality Meat Scotland Cattle & Sheep Assurance Scheme.

Most of Scotland's land area is used for agriculture. Agriculture impacts the environment, climate change and biodiversity in both positive and negative ways. Some farm practices can contribute positively to natural flood management, carbon capture, soil management and biodiversity. However, some farm practices also have negative impacts on soil and water quality, biodiversity, erosion, and greenhouse gas emissions.

Through these wider economic and environmental impacts, the sector also has an impact on many other businesses and supply chains in Scotland, such as leisure and tourism, food and drink, veterinary services, the haulage industry and forestry.

Forestry^[13]

Forestry makes a substantial contribution to the economy at both national and local levels. In 2015, forestry's economic contribution to Scotland was worth almost £1 billion in gross value added per year. It employed over 25 000 people (full time equivalent posts), of whom over 19 500 were in forestry and timber processing, and over 6300 in forest recreation and tourism.^[14] The key economic activities are production of timber and other wood fibre, and the provision of recreation and tourism assets. The majority of economic activities associated with woodland creation, management, harvesting and transportation, as well as a significant part of the processing of wood products, takes place in rural areas. Businesses range in scale from artisan furniture-makers, family-owned contracting micro-businesses and community-based biomass enterprises to UK-wide woodland management companies and multi-million-pound panel, pulp, paper and sawmills operating internationally. The forestry sector is therefore particularly important for these communities.^[15]

The forestry sector, is growing and thereby increasing its demand for 'forest floor' jobs, as well as diversifying and requiring more varied skills.

At the same time, in common with other land-based industries, forestry has an ageing workforce and is experiencing challenges in attracting and retaining young people.

Scotland has good growing conditions for productive timber species, and a highly efficient timber-processing sector. Most of the wood produced in Scotland for downstream processing and manufacture is softwood from fast-growing conifer species. Hardwood from slower growing broadleaved species makes up a much smaller proportion of the overall harvest but provides an important resource for the wood fuel market and high value artisan and niche construction sector products.

Peatlands ^[16]

Although many will rightly associate peat, peatland habitats and products with the Highlands and Islands, most of us, even in our major towns and cities are never far from a peatland.

Healthy peat plays a vital role in carbon storage and combating the effects of climate change as well as providing a wider range of benefits to areas including:

• Nature - uniquely adapted groups of birds, plants, fungi, invertebrates and micro-organisms, some not found together anywhere else in the world, with some birds nesting at the highest densities yet recorded
• Water supply – much of our drinking water comes from peatland areas and many of our important salmon rivers depend on peaty catchments. Maintaining peatlands in good condition, or restoring them, makes for cleaner water and lower costs to society
• Flood management – intact peat bogs store water and help to maintain steady flow rates on salmon rivers. Natural and restored peatlands provide reduced downstream flood risks compared to damaged peatlands
• Livestock grazing – many peatland areas support grazing livestock, mostly sheep, but also cattle. On some sites these can be used to control scrub and tree regeneration
• Sporting management – sustaining much of our deer stalking, grouse shooting and fishing enterprises
• Recreation – whether its hill walking, birdwatching or gazing from a lonely road, these remote, rolling peatlands provide an unrivalled and distinctly Scottish experience
• Cultural enrichment – peatlands provide a sense of place for many and have been an inspiration for art, song, poetry and literature down the ages and this remains the case today. Their colours are also captured in some tweeds and tartans
• Health – walking for its own sake, to reach distant mountains or a remote loch or stream brings the benefits of physical exercise, refreshes the senses and can encourage calm reflection in otherwise busy and crowded lives

Of course, it is only when our peatlands are in a healthy state that all these benefits flow. Much of our peatland is in poor condition and requires suitable management or even restoration. It is estimated that 70% of our blanket bog and 90% of our raised bog area has been damaged to some degree. Damaged bogs are a source of climate-warming greenhouse gases, reduced water quality and deliver a diminished range of other services. We need to take action to reverse this trend, and to restore and improve our peatlands.

At the heart of this we want to encourage partnerships with and between private land interests, industry, public bodies and environmental NGOs.

Scotland's Climate Change Plan and emissions pathways

The Scottish Government publishes a statutory strategic delivery plan for meeting our greenhouse emissions reduction targets at least every 5 years. This plan sets out bold actions, including the direction of changes which are needed in our wider economy and society to capitalise on the opportunities presented by net zero, which in turn sets our pathway to our emissions reduction targets.

Although within the Plan Land Use, Land Use Change and Forestry and Agriculture are seen as two separate chapters, these sectors are intrinsically linked and, as highlighted in the introduction of this document, pressures and actions in one can have impacts and benefits across the other. The structure of the plan is in keeping with the greenhouse gas inventory which estimates greenhouse gas emissions by sources and removals within internationally agreed sectors.

Scotland's Securing a green recovery on a path to net zero: climate change plan 2018–2032 - update is the current Climate Change Plan and sets out the emissions reduction pathways and actions to deliver for both Land Use, Land use Change and Forestry as well as Agriculture out until 2032. It should be noted however that work on the development of Scotland's next Climate Change Plan is underway and the plan is due to published in draft in November 2023; this may see variations in the emissions pathways and actions set out in the current Climate Change Plan.

Greenhouse gas statistics

Scottish Greenhouse Gas Emissions 2020, show that land use, land use change and forestry and agriculture were both emitting sectors, with emissions of 0.5 MtCO2e and 7.4 MtCO2e respectively. (See figure 5 below for a national breakdown of all sectors.)

Scotland's wider environment and land use

As highlighted in the recently published Biodiversity strategy to 2045: tackling the nature emergency In Scotland, the evidence around the scale and nature of the biodiversity crisis is strong and continues to mount. The evidence points to a natural environment that has been heavily degraded, with continued declines across much of our land.

The Biodiversity Intactness Indicator shows that Scotland has lost almost half of its historic land-based biodiversity. That is slightly less than other parts of the UK, but Scotland still ranks in the bottom 25% of nations.

Measurements of natural capital indicate it has declined by over 15% since 1950. For example, The Natural Capital Asset Index finds that only around 64% of Scotland's protected woodlands are in a favourable or recovering condition despite being the habitat with the greatest ecosystem services potential in Scotland.

Scotland has seen a 24% decline in average abundance of 352 terrestrial and freshwater species since 1994, (noting that 1994 was not a high point), and a 14% decline in range for 2,970 terrestrial and freshwater species since 1970.

National parks, Natura 2000, Sites of Special Scientific Interest and Ramsar sites and nature reserves

Scotland currently has two National Parks:

• Loch Lomond and the Trossachs National Park, established in 2002.
• Cairngorms National Park, established in 2003 and extended in 2010.

Both serve as models of sustainable development and with that are central to rural economic development and recreation, sustainability, and conservation efforts.

Park Authorities are required to prepare a five-year National Park Partnership Plan to serve as an overarching management plan. These plans set out how all those with a responsibility in each park, across public, private and voluntary organisations, will co-ordinate their work to address the most important issues in relation to conservation, visitor experience and rural development.

Natura 2000^[17]

This is the Europe-wide network of protected areas developed under the European Commission's Habitats Directive and Birds Directive. It forms the cornerstone of the European Union's biodiversity policy. The Natura 2000 Network is made up of:

Special Areas of Conservation (SAC): these support rare, endangered or vulnerable natural habitats and species of plants or animals (other than birds) of European importance, and are designated by Scottish Ministers under the Habitats Directive

Special Protection Areas (SPA): these support significant numbers of wild birds and their habitats and are designated by Scottish Ministers under the Birds Directive.

Scotland provides the largest part of the UK contribution to the Natura 2000 network, with 15% of its land designated under the Birds and Habitats Directives. The UK figure is 8.5%. and the average across the EU is 18%.

As of July 2018, Scotland has 394 protected Natura 2000 sites, comprising 241 SACs and 153 SPAs. These sites protect 79 bird species, including golden eagle and capercaillie; 18 other types of animal species, including seal, dolphin and wild Atlantic salmon; and 56 types of habitats, including reefs, uplands and machair.

Sites of Special Scientific Interest (SSSIs)^[18]

These form a set of nationally important natural areas in the UK. SSSIs in Scotland are notified by NatureScot for a range of habitats and species under powers granted by the Nature Conservation (Scotland) Act 2004, using UK-wide selection criteria. There are currently 1,440 SSSIs in Scotland. You can find more information on SSSIs on the nature.scot website.

Ramsar sites^[19]

These are wetlands of international importance designated under the Ramsar Convention on wetlands, an intergovernmental treaty that aims to conserve wetlands through local and national action and international cooperation. There are 51 Ramsar sites in Scotland, covering around 4% of Scotland's land area.

While there is no dedicated legislation for the protection of Ramsar sites in the UK, all Scottish Ramsar sites are either Special Protection Areas (SPAs), Special Areas of Conservation (SACs) or Sites of Special Scientific Interest (SSSIs) and are protected under the relevant statutory regimes.

National Nature Reserves (NNRs)

NNRs are areas of land set aside for nature and signify Scotland's best wildlife sites.

The Agriculture Reform Programme

This first just transition plan will be published before the finalisation of plans for the Agriculture Reform Programme. However, this plan will be strategic in nature, allowing us to move and flex with the ongoing development of the Agriculture Reform Programme.

Throughout the development of the Programme, the Scottish Government will continue to work with the agriculture industry through the Agriculture Reform Implementation Oversight Board (ARIOB) and other industry stakeholder groups, building on the excellent work completed by our successful Farmer-Led Groups (FLGs) initiative. In line with the principles of a just transition we remain committed to ensuring that tenant farmers, smallholders, crofters, new entrants, and new land managers are given equality of opportunity, to allow them to play a key role in making our vision for agriculture a reality.

In February 2023 the Cabinet Secretary for Rural Affairs, Land Reform and Islands published the Agriculture Reform Route Map, setting out the timescales for information and interaction with the agricultural industry. This route map provides Scotland's farming and food production industry with clarity and confidence on key dates, expectations, the various measures being proposed, and support that will be available to prepare for implementing change.

A phased approach

The existing framework of support will continue in 2023 and 2024 to provide stability to farmers and crofters. From 2025, new conditionality will be delivered under existing powers. From 2026, with the approval Parliament, new powers from the new Agriculture Bill will be used to launch the new Enhanced Payment. Co-development of this element is being prioritised through 'Preparing for Sustainable Farming', under the National Test Programme which launched in Spring 2022 (see Figure 6). In the shorter term (until 2025) the National Test Programme will invest up to £51 million to help farmers and crofters undertake the essential first steps towards more sustainable farming.

Figure 6