The future of Scottish agriculture post-Brexit Contents

3Agricultural policy

33.Currently Scotland, and the rest of the UK’s, agricultural policies are set within the EU’s overarching Common Agricultural Policy (CAP). This provides EU-wide rules, while allowing Member states some flexibility, this means that while there are some differences in Scotland’s agricultural policy compared to the rest of the UK there is a limit to how different they can be. However, when the UK leaves the EU this will stop applying, which might allow for more policy differentiation between Scotland and the rest of the UK. During this inquiry we explored what impact this would have on:

Agricultural support payments;
Continuity of farm support payments post 2019, and
Agricultural standards and regulations.

Agricultural support payments

34.Under the CAP, the Scottish Government has been able to design its own farm support payments to meet the needs of farmers and crofters. There are some differences between support payments in Scotland from the rest of the UK, including:

Coupled Payments: Scotland is the only UK nation to use coupled payments, a form of financial support linked to production.62 These include the Suckler Beef Scheme and the Scottish Upland Sheep Scheme, and
Support for Less Favoured Areas: Alongside Wales and Northern Ireland, Scotland uses Pillar II funding to support farmers and crofters in remote and constrained areas through its own Less Favoured Area Support Scheme (LFASS).63

35.Most witnesses agreed that these differences in farm support were essential to the agriculture sector in Scotland and provided a “vital injection of funding” to farmers and crofters.64 Scotland’s Rural College (SRUC) told us that payments such as LFASS were a “lifeline” to rural communities and helped to sustain agricultural activity in Scotland’s most fragile areas.65 Without these form of subsidies we heard that many hill farms and crofts would become unsustainable, which could lead to land being abandoned.66 We were told by crofters in the Outer Hebrides that this would have a detrimental impact on the local environment and risk breaking apart communities.67 Fergus Ewing MSP, Cabinet Secretary for the Rural Economy, told us coupled payments and LFASS had been essential in sustaining rural communities with sparse populations, and that it was the Scottish Government’s intention to maintain these payments post-Brexit through its own Agriculture Bill.68

36.The extent to which Scotland will be able to maintain these payments will depend on the UK Government’s post-Brexit schedules for agricultural support being accepted by the World Trade Organisation. The WTO Agreement on Agriculture places limits on agricultural subsidies which could distort global trade. These payments fall into different categories, with the most restrictions being placed on “Amber Box” subsidies.69

The Agriculture and Horticulture Development Board said it would be likely that Scotland’s coupled payments will be classified as an Amber Box payment as these payments are linked to production.70 SRUC’s Senior Agricultural Economist, Steven Thomson warned the Scottish Government would be “hamstrung” if this prevented them from using coupled payments at current levels.71

37.When we asked the UK Government for an update on its WTO obligations, Defra’s Guy Horsington, Deputy Director for Future Farming Policy, sought to alleviate concerns, stating that the Scottish Government would be able to maintain both coupled and LFASS payments:

We do not envisage any circumstances where the freedoms that the Scottish Government have to continue the LFASS scheme would not continue. […] the voluntary coupled support [meanwhile] is categorised and classified at the moment as a blue box, which therefore does not fall within the amber box. As long as we classify it and as long as the WTO does not change its agreement on agriculture, we should continue to ensure that Scotland can direct its support on the basis of the topography and the farming requirements of Scotland.72

This was echoed by the Secretary of State, who said this would allow the Scottish Government to allocate its agricultural budget “as it sees fit for the specific interest of Scottish farmers”.73

38.Direct payments have an important role in supporting agriculture across Scotland. Without this support many farmers and crofters will become unprofitable causing economic, environmental and social problems for their communities. We welcome the unequivocal assurance from the UK Government that the Scottish Government’s existing direct payments will not be restricted by the UK’s WTO obligations.

Continuity of Payments

39.The Common Agricultural Policy provides the current legal mechanism through which the Scottish Government makes farm support payments. However, a new mechanism to make these payments will be needed after Brexit. In October 2018, the UK Government published its Agriculture Bill which would, amongst other things, give the Secretary of State powers to create a new system for delivering agricultural support payments in England.74 When drafting the Bill, the Government offered to include a schedule for each of the devolved administrations to give them the powers to develop their own payment scheme. The Wales and Northern Ireland administrations accepted this offer, but the Scottish Government chose not to accept a schedule due to their ongoing dispute with the UK Government over legislative consent motions.75 Instead they announced their intention to introduce their own Agriculture Bill through the Scottish Parliament.76

40.Without these powers there was concern about whether the Scottish Government would be able to deliver agricultural support payments beyond 2019. In October 2018, NFU Scotland told us clarity was needed on which legal framework would be used to enable these payments:

The concern of Scottish farmers and crofters is that at this moment in time the Agriculture Bill sits here in Westminster and the Scottish Government have declined to take a schedule within that Bill […] therefore, without anything clear coming from the Scottish Government themselves as to what they will do as an alternative approach, that is giving significant cause for concern.77

This view was shared by Vicki Swales, Scottish Environment LINK, who told us that it was “increasingly urgent” the Scottish Government set out their intentions of how payments would proceed, arguing that without this it would be difficult for farmers to make plans for the future.78

41.The Scottish Government initially told us it would have the legal ability to continue CAP payments in 2019 through either the European Union (Legal Continuity) (Scotland) Act, which intended to retain EU law and create powers for Scottish ministers to make amendments outside the EU, or the European Union (Withdrawal) Act,79 with the Cabinet Secretary for the Rural Economy telling us that “existing powers under devolution” provided the legal mechanism for farmers in Scotland to receive payments from 2020.80 This would give the Scottish Government the power to make payments, but not adjust or change CAP rules.81

42.Following the UK Government decision to refer the Scottish Government’s Continuity Act to the Supreme Court, and the ruling that one section was not within Holyrood’s remit,82 there was some uncertainty about whether this would impact the Scottish Government’s ability to make farm payments. Scott Henderson, Scotch Beef Association, told us this could have been avoided if the Scottish Government took a schedule in the UK Agriculture Bill.83

43.In March 2019, we asked Michael Clancy, Director, Law Society of Scotland, to provide an update on the situation. He confirmed that payments would be possible as a result of the Common Agricultural Policy (Direct Payments to Farmers) (Amendment) (EU Exit) Regulations 2019, a piece of UK secondary legislation introduced via the EU Withdrawal Act.84 The explanatory memorandum for this states that it will:

ensure that retained EU legislation relating to CAP Direct Payments will continue to operate effectively throughout the UK after EU Exit […] agriculture policy is a devolved matter in Scotland and Wales and a transferred matter in Northern Ireland. These instruments will apply across the UK in order to provide a common approach to the retained EU Direct Payments

This was echoed by the Secretary of State, who told us in June that farmers across the United Kingdom would continue to be able to be paid as a result of this secondary legislation.85

44.To date neither Governments has made significant progress with their respective pieces of primary agriculture legislation. The Scottish Government has not yet published or introduced an Agriculture Bill, and while the UK Government’s Bill completed its Committee Stage in the House of Commons in November 2018, no dates have been scheduled for its remaining stages.

45.The uncertainty about the legal basis for continuing to make agricultural support payments to Scottish farmers after Brexit has been a cause of great concern. This has not been helped by the lack of a clarity from both the UK and Scottish Governments on when their respective Agriculture Bills will be passed. We recommend that the UK and Scottish Governments work together to agree a joint statement on the future of these payments to provide clarity about the future of these payments and announce timetables for the passage of their respective pieces of agricultural legislation.

Agricultural standards

46.Scotland operates within a framework of EU legislation, which regulates agricultural and environmental standards. While the Scottish Government must meet these standards, it has the flexibility where matters are devolved to exceed EU standards, such as in setting more rigorous air quality standards.86 Additionally, regardless of other UK nations’ approaches, it can utilise any flexibilities provided to regions under EU rules in order to meet Scottish priorities, such as prohibiting the cultivation of GM crops.87 Most of our witnesses agreed that this principle of flexibility was beneficial for Scotland, as it allowed policy to be tailored to meet the needs of Scottish agriculture and its unique set of circumstances. Sheila George, WWF Scotland, argued it was important this flexibility remain post-Brexit.88

47.If the UK leaves the EU, there will be potential for further policy differentiation within UK agriculture. However, both the UK and Scottish Governments have agreed that there will be a need to maintain a degree of alignment to: support the UK internal market, ensure the UK meets international agreements, manage common resources and deal with cross-border issues.89 This will be achieved via UK-wide common frameworks.

48.Common frameworks are intergovernmental commitments to abide by common goals, minimum standards, harmonisation, limits on action, or mutual recognition of standards.90 Similar arrangements already exist between the UK and Scottish Governments in relation to animal and plant health and forestry research.91 In April 2019, the UK Government published its most recent assessment of where common frameworks might be needed. identifying 160 areas where EU law intersects with devolved competence.92 Of these, legislation may be required in 21 areas (mostly related to agriculture and the environment), while in 78 areas its proposed that non-legislative measures (like concordats or Memorandums of Understanding) can be used to underpin these new frameworks.93 Legislative frameworks are proposed to cover agricultural support, animal welfare, pesticides, food labelling and GMO cultivation.94

49.All our witnesses agreed that frameworks were needed in these areas to ensure effective environmental protection and to preserve the integrity of intra-UK trade. NFU Scotland said this must not allow “unconstrained policy divergence”, arguing that this would likely cause internal market distortions.95However, Professor Julie Fitzpatrick, Royal Society of Edinburgh, said it was crucial that frameworks not be too rigid and prevent the Scottish Government from developing a framework of regulation that is “bespoke to Scotland.”96 Without this flexibility, she feared it would be impossible to develop a “Scottish vision for the agricultural sector.”97 Aoife Behan agreed this was the best outcome for Scotland:

The ability to diverge within a broader common framework is absolutely key for all four nations. All four nations have different sets of challenges […] so we need a policymaking capacity to allow for that to happen.98

50.The UK Government has said the process for agreeing common frameworks will respect the devolution settlements.99 The Rt Hon Michael Gove MP, Secretary of State for Environment, Food and Rural Affairs, told us he could not envisage a situation where the UK Government would use its position to impose common frameworks upon the Scottish Government without their consent.100 However, the European Union (Withdrawal) Act 2018 does contain powers for the UK Government to temporarily freeze devolved competence and maintain the current limits mandated by the EU law (so-called “section 12 powers”), which could be used to prevent the devolved administrations legislating if no agreement is reached on common frameworks.101 While both governments told us there was a high degree of cooperation between officials working on common frameworks, no agreement has yet been reached.102

51.Several witnesses suggested that the Joint Ministerial Committee (JMC), the main formal mechanism for ministerial discussions between the UK Government and the devolved administrations, could provide a forum to manage and agree common frameworks. Improving the effectiveness of the JMC was the focus of our recent Report on The relationship between the UK and Scottish Governments, where we made several recommendations to improve the current JMC system, including:

a)The creation of a JMC sub-committee on Common Frameworks to facilitate the agreement of common frameworks, and

b)An improved JMC dispute resolution, which provides all governments the right to initiate dispute proceedings.103

The Rt Hon Michael Gove MP told us that the Government was exploring how a reformed JMC could be used manage these agreements, including dealing with disagreements, saying that:

There are mechanisms that we are developing under the JMC principles where we can try to ensure that if there isn’t agreement then there is a cordial means of reaching that agreement.104

52.We welcome the firm commitment from the Secretary of State that agricultural common frameworks will not be imposed upon the devolved administrations but agreed by consensus on the basis of mutual and meaningful engagement from all parties. These frameworks must ensure that the Scottish Government has at least the same flexibility over agriculture policy as it currently does under the CAP. We believe that a reformed JMC, as recommended in our Report on intergovernmental relations would provide a suitable forum for frameworks to be agreed and managed.

Common framework’s content

53.Although the UK and devolved administrations have broadly agreed where common frameworks are needed, there is less clarity about what they will contain or when they will be published. Professor Julie Fitzpatrick said that stakeholders urgently needed more detail, so they could start planning for the future.105 Scottish Environment LINK agreed and said this needed to be addressed through a transparent and open process.106 Similarly, Michael Clancy, Law Society of Scotland, said the Government needed to reach out and engage with relevant groups and farmers and crofters as they would be directly affected by the agreed frameworks.107

54.In the Government’s update in April, it said work had been split into five phases, the first of which had been completed March 2018:

Phase 1 (Completed): Establishing common framework principles;
Phase 2 (in-progress): Detailed policy development on the areas of EU law which intersect with devolved competencies and how they will be incorporated into common frameworks;
Phase 3: Stakeholder engagement;
Phase 4: Preparing final frameworks for final publication, and
Phase 5: (expected end of 2020) Implementation of final frameworks across the UK.108

However, there are no detail of when each stage within this programme is likely to be completed, and the process has been stuck in phase 2 for 16 months.

55.While progress has been made on the governance and development of common frameworks, it has been difficult to obtain detail about their contents. We therefore urge the Government to publish its draft agricultural frameworks and set out a timetable for their agreement so Scottish farming groups can help shape their final form and start preparing for any changes they introduce.

62 Scottish Parliament Information Centre, Agriculture and Brexit in Ten Charts, 23 February 2017.

63 Scottish Government, Less Favoured Area Support Scheme, 2019

64 FSA003

65 FSA009

66 FSA003

67 Scottish Affairs Committee, Visit to the Isle of Lewis presentation, 2019

68 Q517 and Scottish Parliament, Official report 10/01/2019. Col 61

69 World Trade Organisation, Domestic support in agriculture.

70 Agriculture and Horticulture Development Board, The WTO and its implications for UK Agriculture, 2017

71 Q256

72 Q604

73 Q606