Director of Policy's Blog - 21 February 2019

The Fallacy of Robbing Peter to Pay Paul – Director of Policy Jonnie Hall discusses the dangers of pitting different sectors against each other over support.

The current and very critical debate over how to make up the shortfall in support for hill farmers and crofters who face cuts to funding of the 2019 and 2020 Less Favoured Areas Support Scheme (LFASS) has ignited some misplaced suggestions that other sectors may have to carry the cost. Any and all such suggestions, or even proposals, are wholly unacceptable and would be damaging - not least as it would amount to an overall erosion of Scotland’s already woeful agricultural support settlement.

There is clearly a challenge ahead to secure the funding to make good the LFASS shortfall. And the repeated intention of the Scottish Government, following intensive lobbying by the Union, is that support equivalent to the current £65 million LFASS budget will be secured - albeit there is also a need to find an effective and legal means of delivering the shortfall faced by each and every LFASS recipient.  While the political intent has been made clear, the practicalities of securing and delivering the funding still need to be nailed down.

NFU Scotland is unequivocal in its view that there should be absolutely no manipulation of the current payment rates of the Basic Payment Scheme (BPS) to offset any LFASS loss. Reducing Region 1 payments would significantly and adversely impact on more productive land across Scotland.

This would disadvantage arable producers, not least in comparison with English counterparts, and any increased chasm between Scottish growers and those in the rest of the UK or the EU would severely undermine the sector.  That would be unacceptable.

Any cuts to Region 1 payments would significantly hinder all of Scotland’s more productive land. All land under permanent and temporary grass, cereals, potatoes, vegetables and other cropping would be hit. It would be naive to think reducing Region 1 payments would have anything other than a damaging effect across all sectors.

Robbing Peter to pay Paul is simply unacceptable on a number of counts. And would also be counter to the Scottish Government’s own policy approach set out under ‘Stability and Simplicity’.  Whether it be the direct support of Pillar 1 or other elements of the rural development funding in Pillar 2, making up the LFASS shortfall in such a way would simply result in an erosion of the overall package of support to Scottish agriculture.

The Scottish Government has suggested that the outcome of the on-going Bew Review into the intra-UK allocation of farm support will plug any funding gaps.  The Review is considering the convergence funding received by the UK in the current Multi-annual Financial Framework (MFF) and is looking at what factors should be taken into account to ensure an equitable intra-UK allocation of domestic farm support funding to 2022 or the end of this parliament.

It is without question that Scotland should be the major beneficiary of this process.  However, any convergence dividend should be targeted at Pillar 1 direct support to the benefit of all BPS recipients across all sectors, and not be used to underpin Pillar 2 measures.  After all, the rural development pot already benefits from the transfer of 9.5 per cent from Scotland’s direct support budget.

While NFUS is in favour of a ring-fenced multi-annual financial framework to underpin any future agricultural policy, it is also obvious that allocations of funding will be marginalised if the total funding to UK agriculture is threatened by the UK’s departure from the EU.  So, the Union continues to lobby HM Treasury to ensure that the at least the same quantum of funding is made available as now under the CAP, and with a multi-annual commitment, as well as seeking a fair and objective allocation rather than the plainly flawed historic allocation that still operates today.

Whatever the future budget settlements for agricultural and rural policy, and their allocation across the UK, it will be the responsibility of the Scottish Government to determine its delivery.  In that respect, the Union is pressing the Scottish Government to safeguard Scotland’s share by ring-fencing it exclusively for agricultural and rural development measures of the future.

As for ‘capping’, in its bluntest form the top-slicing of the largest direct support payments, the notion is flawed.  Scotland may have the lowest per hectare payment rates in the EU but it has some of the highest payments per business – the profile of Scottish agriculture demands relatively larger units in order to stand any chance of viability.  Redirecting support payments to other schemes could seriously undermine the delivery of the multiple benefits that active farms and crofts provide.

It would be far better, as the Union’s Steps to Change sets out, to provide every farm and croft with a level of support that relates to both size and activity, and then over time shift the focus of that support from an emphasis on financial stability towards an emphasis on simultaneously delivering improved productivity and improved environmental outcomes – the two being far from mutually exclusive.  The total of support to a business would be upheld, but its deployment would shift from an area-based to an action-based delivery model.   

That may be for the future, but the thinking and development of what is required needs to be done now.

As for the clear and present danger facing LFASS, the solution should be straightforward. LFASS is a Pillar 2 scheme that is jointly funded by the Scottish Government and the EU. The reduction in the LFASS budget as a consequence of EU requirements has enabled the Scottish Government to reduce its contribution and maximise the EU contributions in order to make domestic budget savings.

If there is a political will within Scottish Government to address this issue, as has been clearly articulated, then finding the funding does not then hinge on either the outcome of the on-going review of intra-UK allocations of farm support or manipulating Pillar 1 (direct support) payments, notably BPS.

The LFASS budget shortfalls can be found without any need to undermine the existing ‘stability’ of Scotland’s Pillar 1 and Pillar 2 budgets, and which should be safeguarded to at least 2022.  There is simply no need to look within Scotland’s existing CAP budgets. And there is absolutely no merit or value in trading off the interests of any sector of Scottish agriculture against any other.

Given the current physical, financial and political challenges facing the whole agricultural industry in Scotland, even the suggestion of robbing Peter to pay Paul has been sufficient to create significant turbulence – which is contrary to the stability and simplicity the industry needs right now. 

Author: Jonnie Hall

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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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