A Comment (and Conclusion?) on Convergence

With convergence funding spent, attention must turn to the future writes Director of Policy Jonnie Hall.

Under the last CAP reform, the UK qualified for a £190 million direct support ‘external convergence’ uplift over the seven-year CAP period. This was primarily because of Scotland’s average payment rate, which made the UK’s average payment rate less than 90% of the EU average.

In 2014, the UK Government at the time opted to distribute the funding across the UK using existing historic allocation, with Scotland receiving only £30 million.

However, after years of intensive lobbying spearheaded by NFU Scotland, in September 2019 the UK Government confirmed the return of £160 million in two equal instalments, with the first £80 million being available in the 2019-2020 financial year.

Initially, the Scottish Government announced that £80 million would be paid by March 2020 to active Scottish farmers and crofters. However, that was almost immediately revised with the Scottish Government bringing forward an additional £10 million from the second instalment.

In effect, £90 million was made available in total and £88.2 million committed - paid to 17,936 Scottish farmers and crofters – in the 2019-2020 financial year. This left £71.8 million to be paid out in 2020-2021.

At the end of January, the Scottish Government announced and commenced the start of the second round of convergence payments and, importantly, how those payments would be made up.

Following hard on the heels of Less Favoured Areas Support Scheme (LFASS) payments, this extra injection of cash into Scottish agriculture was as timely as it was welcome.

The Scottish Government has responded positively to NFU Scotland’s consistent calls to make up the shortfall in LFASS payments for those hit by the EU requirements that LFASS 2020 had to be paid out at 40% of the 2018 values.

To make up the shortfall, once again the Scottish Government committed to an ‘Upland Support’ element within the convergence payments.

However, and crucially, this time around Upland Support was a direct top up of LFASS 2020 losses, compared to what would have been received under LFASS 2018 payment rates. This means that all four of the key variables that make up an LFASS claim were included to effectively mean 100% of LFASS payments.

Changing the delivery criteria for the Upland Support element to ensure that there would effectively be no LFASS winners or losers second time around was a clear goal of NFU Scotland. This was championed by its LFA Committee in its policy document, Less Favoured Areas – Delivering for Scotland, which was published last Autumn.

That said, the use of direct support convergence funds to bail out an LFASS shortfall is the point at which the Scottish Government and NFU Scotland rapidly diverge. Using convergence funding borne out of Pillar 1 direct support to bail out any other element of funding short-changes the whole of Scottish agriculture – this time leaving some £33 million less for top-ups to Basic Payments for all.

With almost £39 million then left in the pot to go to the intended Basic Payments targets, it was ill-judged that greater recognition was not given to the value of Region 1 land across every farm and croft. The path chosen by the Scottish Government has generated excessive and divisive redistribution.

Whether it is prime agricultural land growing grain and finishing livestock, or the permanent grass of the inbye so critical to active hill farms and crofts, Scotland’s Region 1 land is the engine house of each business and sector. For Scottish agriculture as a whole, Region 1 is the land that largely generated Scotland’s direct support budget in the first place, and it is the land that does the heavy lifting today.

In addition, the process of ‘internal convergence’ over the last CAP from 2015 to 2019, which saw the creation of just three payment regions and payment rates where once every individual business had its own, has already flattened direct support. This subsequently moved funding towards Regions 2 and 3.  

When added to the delivery method chosen by the Scottish Government for this round of convergence funding, it fails to recognise the economic value of Scotland’s Region 1 land - the majority of which is under grass - compared to how the Scottish Agriculture budget was earned.

That said, the convergence funding is now spent. Attention must look to future funding and, more importantly, how best it can be used to secure the non-binary outcomes that Scottish agriculture is tasked to deliver – producing high quality food to underpin the value of the food and drink sector, while delivering on climate change and biodiversity ambitions and targets.

One thing is certain, the continuation of blunt area-based support will not bring about the required change. Active farmers and crofters must be supported and incentivised to adapt to ever-more challenging expectations. Future support must enable change rather than perpetuate inertia.

As with so many aspects of agricultural policy, levels of funding are critical. But not as critical as how that funding is used to best effect.

Author: Jonnie Hall

Date Published:

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About The Author

Jonnie Hall

NFU Scotland’s Director of Policy Jonnie Hall has been involved with agricultural and rural policy for more than 30 years. He is a graduate of the University of Newcastle-upon-Tyne (BSc. Honours in Agricultural Economics and an M.Phil. in agricultural policy research) and Oxford University (MSc. in Agricultural Economics). Following an academic and consultancy career, Jonnie joined what was the Scottish Landowners’ Federation in January 1998, leading their policy work on agriculture and land use issues. Jonnie then joined NFU Scotland in May 2007, and has overall responsibility for the policy work of NFU Scotland as Director of Policy and Member Services. He has served on all key rural and agricultural policy stakeholder groups.

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