Greening the Common Agricultural Policy

Written evidence submitted by the Scottish Government (GCAP 34)

The Scottish Government welcome this opportunity to present a submission to the Environment, Food and Rural Affairs Committee as part of their Inquiry into the European Commission’s proposals to ‘green’ the Common Agricultural Policy (CAP).

The recent publication of the European Commission’s proposals for the future of the CAP 2014 – 2020, signals the start of formal negotiations to reform the CAP. The CAP plays a vital part in supporting Scotland’s agriculture sector where 85% of our agricultural land is classified as Less Favoured Area (LFA) and two-thirds is suitable only for rough grazing. These reforms will therefore have a major impact on Scotland.

The primary purpose of the CAP must be to encourage food production and with a growing world population and increasing demand for food that purpose has never been more important. The CAP however must also be justifiable in the terms of what else it delivers such as delivering public benefits through environmental objectives.

Scottish Government is keen that the CAP should become greener and deliver more public benefits. However any greening measures must deliver measurable environmental / public benefits without creating unnecessary complexity to the CAP and increasing the administrative burden for farmers and Governments.

Whether the proposal to green direct payments will generate significant environmental benefits?

In relation to the 3 measures proposed;

Crop Diversification

Scottish Government has issues with the crop diversification proposal which specifies that farmers with over 3 hectares of arable land must grow 3 different crops, each covering between 5 and 70 percent of the arable area. Hill farmers in particular will find this difficult, if not impossible, to comply with. These tend to be livestock farms which comprise mainly permanent pasture but where the farmer often grows a field of spring barley for feed and straw. Poor soil and climatic conditions would make it very difficult to grow three different crops in some areas and it is likely hill farmers would have to stop growing any crop to avoid falling foul of the requirement. That could adversely affect biodiversity in the area. Also, as it stands, it is not clear how the proposal would affect farms with permanent crops such as orchards, nurseries etc. Scotland’s soft fruit farming businesses could be affected by this measure.

Permanent grassland

In principle a greening requirement to maintain permanent grassland should be quite straightforward for Scottish farmers. However, the proposed definition of permanent grassland does give us cause for concern. In Scotland, re-seeding grassland often takes place every 7 or 8 years or longer and not every 5 years as outlined in the proposal. It is not clear to us whether the proposal as drafted would accommodate this. Reducing the period between re-seeding grassland in Scotland seems counter to climate change carbon capture objectives and as well as increasing farmers’ costs, there would be an increased administrative burden relating to on-the-spot checks.

The definition of permanent grassland "land used to grow grasses or other herbaceous forage naturally (self-seeded) or through cultivation" poses another problem for Scotland. In Scotland sheep graze on heather in the hills. Heather is not an herbaceous plant and if it were to be excluded and land became ineligible there is a real risk of that land being abandoned which would almost certainly have an adverse impact on biodiversity.

Ecological Focus Areas (EFA)

Ecological Focus Areas have the potential to deliver benefit in terms of the proposed greening measures however there is an issue with the requirement to maintain at least 7% of farmers’ eligible hectares as EFA. Although this 7% includes terraces, landscape features, buffer strips and afforested areas, farmers would be required to declare these annually and administrations would have to carry out additional checks to ensure compliance. Like many other European countries we question whether it is wise to take land out of production at a time when global food security is such a high priority.

General points

Greening should be seen in the context of the overall shape of the future CAP and should not be dealt with in isolation as an issue relating to Pillar 1 Direct Payments. Greening direct payments has the potential to generate significant environmental benefit if properly targeted towards meeting the objectives of Water Framework Directive, Nitrates Directive, Habitats Directive and Climate Change. The Pillar1 greening proposals are also likely to provide more public good than voluntary measures.

Good management would be required to ensure payments are not made for little gain: i.e. land managers claiming for Ecological Focus Areas (EFAs) which provide no real benefits. Measures such as riparian buffer areas or uncultivated field margins are likely to provide the most environmental benefit.

In general however it is not clear that the greening proposals as currently framed will bring the hoped for increase in environmental benefits. In addition, compliance with the measures will increase costs and bureaucracy for farmers and administrations. There needs to be a balance between benefits and costs. In order to find this balance we need to ensure there is sufficient flexibility in the rules to allow Member States and regions to tailor the greening measures to their particular circumstances.

The impact of additional greening requirements on food production and the competitiveness of the agricultural industry.

It could be argued that properly planned and managed EFAs should have only a modest impact on food production or competitiveness. It is difficult to quantify what effect other greening measures would have without analysis of measure against farm type.

The crop rotation and permanent grassland issues described in the answer to the previous question could present major problems to Scotland’s upland livestock farmers. These upland farms are vital to Scotland’s livestock industry as they supply much of the livestock for finishing on the better quality land. Any loss of farming in these areas could have a negative impact on the whole livestock sector and would affect both food production and the competitiveness of the agricultural industry in Scotland.

Consistency of the greening proposals with CAP simplification agenda.

Whilst there is an environmental argument that the objectives of greening direct payments should not be compromised in meeting the simplification agenda, the true cost of implementing the proposed measures must be borne in mind.

There is general agreement that the CAP needs to become greener. However it is important that any greening measures must deliver clear and measurable environmental / public benefits without creating unnecessary complexity and increasing the administrative burden for farmers and Governments.

The proposals as framed do not meet that criteria, they appear overly complex and potentially. Not only would this impact on farmers it would require administrations to carry out additional checks to ensure compliance.

How greening pillar1 can be made more coherent with agri environment schemes.

The proposals should enable Member States to build on the environmental measures supported in the current Rural Development Proposals. Greening measures should used to set a baseline on which agri environment measures can build to provide additional benefit.

Provision of advisory services could play a vital role in linking pillar1 and agri-environment measures to help meet the requirement in CAP reform, helping beneficiaries to become more aware of the relationship between agricultural practices and management of farms on the one hand, and standards relating to the environment on the other. However this might use resources from Pillar 2 and reduce the available funding for other measures.

Recommendations for improving the greening proposals.

Clarification is needed from the Commission on certain issues, for example a definition of what ‘eligible’ land the 7% as EFAs will apply to, clarification of how the 5 year re-seeding rule will be implemented.

The proposals should recognise that a one size fits all approach for the whole of Europe will not deliver the public benefits envisaged. There must be flexibility for Member States to take account of particular circumstances such as those described under the crop diversification and permanent grassland issues outlined in the first question. That flexibility would allow Member States/ Regions to target the measures to ensure they deliver most benefit. Such flexibility would also enable Member States to keep the measures as simple as possible.

It is essential that any greening measures strike a balance between delivering public good without being unnecessarily complex and burdensome.

Other elements of the CAP

The draft regulations contain a lot of detail and some important aspects require clarification from the Commission. It is essential however that Scotland receives a fairer allocation of both Pillar 1 and Pillar 2 funding.

Scotland currently receives the 4th lowest Pillar 1 rate per hectare in Europe, at €130/ha it is less than half the EU average of €269/ha. Scotland’s rate is in stark contrast to the rest of the UK where the averages are Wales €247/ha, England €265/ha and NI €339/ha. The combined UK average is €229 /ha which is 85% of the EU average meaning the UK is likely to benefit from the Commission’s convergence proposals to help Member States that receive less than 90% of EU Average direct payment per hectare. The proposal recommends that one third of the gap between the Member States average and 90% of the EU average should be closed by 2019. The situation outlined above presents a very strong argument that any uplift the UK receives should come to Scotland to address the very low payment rate.

In terms of Pillar 2 Scotland receives the lowest allocation per hectare in Europe. The total Pillar 2 allocation to Scotland under the Rural Development Regulation 2007-13 amounts to some €360million. This compares to some €2.1 billion allocated to Finland, a country of similar size to Scotland in population terms (5.2 million people) or €2.3 billion allocated to Ireland, a country almost the same size as Scotland in terms of utilisable agriculture area (UAA).

Scottish Government will be holding a consultation on the Commission’s proposals and also discussing them with our future CAP Stakeholder Group, the following is therefore our initial position which may develop over the coming months.

Direct payments

· Welcome retention of direct payments.

· Support the convergence proposals to help Member States that receive less than 90% of EU Average direct payment per hectare (Scotland currently receives less than half the EU average).

· Proposals need to provide the flexibility and regionalisation for Scotland to deliver an area based system that meets our needs.

Active farming

· Strongly oppose any compulsory rule on farming and non-farming income – Active farming test should be about the way the land is managed not the financial accounts of the claimant.

· Welcome measures to allow Member States/ Regions to set a minimum activity level on areas that naturally meet GAEC requirements without any active land management.

Coupled payments

· Support the continued provision for coupled payments – These are vital for Scotland’s beef sector much of which is in the Less Favoured Areas (LFA).

· Would like to see the 5% limit in the draft regulation increased – The Pack Inquiry recommended 15% of the national ceiling should be used for coupled support in Scotland.

Young Farmers and Small Farmers

· Simplified scheme for small farmers could be useful in Scotland where we around 1200 farmers that receive €500 or less and around 1400 that receive between €500 - €1000 per year in direct payments.

· Young farmer scheme step in right direction but only applies to those entitled to basic payment, does not address issue of new entrants after 2014.

· Commission’s ideas on new entrants not good enough, must ensure that new entrants since 2004 with no current entitlements and those entering after 2014 are adequately provided for.

· Young and Small Farmers proposals could be useful but should be voluntary.

Capping

· Concerned about Commission’s proposed approach, which could give farmers an incentive to split their business to avoid capping causing unacceptable increases in bureaucracy and administrative burden with lawyers and accountants the main beneficiaries.

· However, need to look at the whole picture, how many businesses will really be affected and what will happen to any money raised.

Areas with Natural Constraints (ANC)

· The proposal for Pillar 1 payments to producers in the LFA/ ANC chimes with the pack Inquiry recommendations – Need to consider whether to use this in Scotland but useful to have this option.

Simplification

· Strongly support aims to simplify the CAP as much as possible –see link to regional flexibility which is key to ensuring that CAP can be tailored to local needs.

· Must ensure that simplification also applies to the control and monitoring regime administrations will need to comply with and that any penalties are proportionate to the seriousness of the issue.

Pillar 2 Rural Development

· Support the proposal to transfer funds from Pillar 1 to Pillar 2 through the flexibility option.

· Flexibility option must not be seen as a substitute for getting a fairer allocation of P2 budget.

· Need flexibility to maximise value for money - Support proposals to remove the current axes.

· Negotiations on proposals likely to take some time before agreement is reached - concerned about new Rural Development programmes being written, approved and ready by 1 Jan 2014.

· Strongly recommend that interim arrangements are considered in the event of programmes not being approved by 1 Jan 2014 to avoid a hiatus.

1 December 2011

Prepared 21st December 2011