Scotland’s New CAP Package – Where Are We Now?

A year has flown by since Cabinet Secretary Richard Lochhead MSP stood up in the Scottish Parliament and, after four years of European and domestic deliberation and negotiation, set out Scotland’s CAP package in fifteen minutes.    

In a moment, it was all very clear what Scotland was going to do.  But in the next, there was stark realisation that making this all happen effectively in practice would be a much greater challenge.

Since June 2014, NFU Scotland has worked continuously and tirelessly with Scottish Government to try to piece together what was always going to be a complex range of support measures that continue to be mired in regulatory requirements.

There is no doubt that Scotland’s very complex farming landscape demanded a complex package of direct support measures.  A simple but blunt approach would have been disastrous for Scotland’s far from uniform agricultural industry.  The flexibilities won a year ago were needed to help target a limited budget across a vast range of farming interests and enterprises that span a complete agricultural landscape that also includes a huge area of less productive rough grazing.  

Scotland’s farming diversity is its strength.  It covers everything from soft fruits, vegetables, potatoes and combinable crops to intensive grassland producing the best beef, milk and lamb, and uplands and hill grazing that underpin livestock systems.  All stitched together through interdependent farming systems, enterprises and businesses.

But when it comes to shifting from the historic production-based Single Farm Payments Scheme (SFPS) to the new land-based Basic Payment Scheme (BPS), together with the new concepts of greening payments, young farmers’ top-ups, etc., then Scotland’s farming tapestry would always ensure a significant shift in where support payments end up.

That challenge has been compounded further by the blunt fact that there is just less money in the CAP budget from 2014 to 2020.  The fallout from the shift to area-based payments was always going to be difficult.  Having less money as well just makes it all the more brutal.

But we are where we are.  So where is that right now?

We have the three Payment Regions, so BPS support will be distributed to target better quality and more productive types of land.  And the vitally important process of regionalisation – getting every field parcel into the right Payment Region – is almost complete, subject to some outstanding reviews.  That is no mean feat, with the best part of half a million fields having to be allocated to one of the Payment Regions.  It is also the crucial first step to being able to make any new BPS payments.

Next comes the allocation of the new BPS entitlements.  Both NFU Scotland and Scottish Government wanted to close down the potential of simply occupying land to draw down support payments.  But the European Commission (EC) regulations forced our hand, and Scotland had little or no option in the end other than to base allocation on eligible hectares declared in 2015.  

Together with a the lack of robust farming activity requirements within the EC regulations, on all types of land, the 2015 allocation has caused frustration and anger for many businesses that rely on seasonally let land.  And has left the door ajar for some intent on claiming support without bearing the management responsibility and risk of properly farming the land.

EC regulations defining both who is an ‘active farmer’ and what ‘active farming’ is could be viewed as a fine work of fiction, but they are now fact.  And the fact is that, despite some stern rhetoric from Scottish Government, there is a real danger that a significant share of Scotland’s meagre Pillar 1 budget could be soaked up by underactive land at best and what could be regarded as inactive land at worst.  The concepts of ‘naked acres’ and ‘slipper farming’ have not yet been confined to history with the rest of the SFPS.

Scottish Government also agreed to NFU Scotland’s demands for a transition to area-based payments over five years to 2015.  The cliff edge of removing all historic payments overnight could have been terminal for many established businesses that sustain the supply chain in many of Scotland’s key sectors.

But the transition that many now face is not what NFU Scotland signed up for.  The reality is that initial budget cuts in 2014 and reductions from the BPS 2015 budget to fuel greening, coupled support, young farmers’ top-ups and a new national reserve mean that the initial steps in transition will mean a soft landing is just not on for many productive businesses.  The first year or two of the new regime could well be very bruising for many.

The flip side to transition is the national reserve.  Not going to full area-based payments overnight had to be conditional on a national reserve that went beyond current and future new entrants to help those disadvantaged by the rigours of the old SFPS system.  And so Scottish Government rightly put in place a national reserve to accommodate those no longer considered as new entrants but who were stuck with little or no historic support. But yet again, the EC rules meant drawing up eligibility requirements that will leave some still feeling mistreated by a support system intended to underpin current farming activity.

The mandatory top-up to BPS payments through the Young Farmers’ Scheme remains unchanged, but it is yet to be seen how this will impact on the Pillar 1 budget and what benefits it might deliver for those who qualify.  If it offers additional support for a new generation building up new farm businesses then it will be of real value.  If it only recycles funds from BPS to long-established businesses then its purpose could be cast into doubt.

And then there is greening.  There can be no avoiding the fact that Scotland has to do greening, so every BPS claimant should start with the assumption that part of the deal is a commitment to greening.  As much of Scotland is covered with permanent grassland, for many the greening obligations may be negligible.  But even right now Scottish Government are looking to introduce compulsory measures on permanent grassland in Payment Region 1 that would go above and beyond the EC’s standard greening requirements – gold-plating by any other name and a step away from simplification.  

And for those with significant enough areas of arable land - not just those regarded as ‘arable producers’ - the crop diversification (CD) and ecological focus areas (EFA) requirements are already proving very challenging.

No matter what guidance on greening is made available, or well-intended greening checks that are put into online SAF application systems, when it comes to the their practical application many producers are still left clutching to hope that CD and EFA requirements have been met and will pass muster if inspected.   

But it could have been different.  It could have been easier for Scottish agriculture to meet the standard greening requirements set by Europe.  But Scottish Government chose to go above and beyond Europe’s standard in a number of greening aspects.

Encouraged by Commissioner Hogan’s simplification initiative, Scottish Government’s own recent calls on greening compliance have a very hollow sound given the fact that, this time last year, Scottish Government refused to take up an option to standardise EFA measurement, and also cut short the number of EFA options for Scottish producers.  Even the nitrogen fixing crops option that is available carries management requirements not found elsewhere that effectively makes it a non-starter.

On a more positive note, the effective roll-over of beef calf payments with a bigger budget than in recent years offers targeted support to one sector that is arguably the most exposed to the challenges of losing historic SFPS payments.  Calf payments will only ever be a contribution to the costs of keeping the suckler cow, but this last remnant of production support is of value to the red meat sector as a whole and will now also recognise the additional costs of maintaining suckler herds on Scotland’s islands.

And any coupled support in the new CAP regime is the only guarantee that support will only go to those producing, and who carry all the risk and costs that go with that.  Some in other sectors will disagree, and with some justification, but the beef sector probably has most to lose as it tries to adjust to a very new operating environment.

While it is also essential to target support at hill flocks through coupled payments, there can be no doubt that the new ewe hogg coupled scheme will prove challenging.  Eligibility rules and compliance, together with the practicalities of gathering, tagging, away wintering and so on, inevitably make this new scheme daunting.

But the new scheme offers the first opportunity in over a decade to directly support those with regular breeding flocks on the most disadvantaged land.  Those sticking to the task, choosing activity over abandonment, deserve this support.  Extensive grazing by sheep may be the only agricultural option on much of Scotland’s land, but its real value extends well beyond farming, crofting or land use – and that needs to be recognised.

And finally, there is the new IT system and the necessary processes to allow claims to be submitted, inspections carried out, and payments made.  The complex new CAP regime always meant a new and expensive system, riddled with teething troubles that will take this year’s SAF process right down to new wire.  Like it or loathe it, if payments are to be made as close to the window opening on 1 December we all need a system that is just about fit for purpose.  Right now, that is just about what Scotland’s got.  

We can all criticise policy choices, whether they be NFU Scotland’s or those of Scottish Government.  But both parties are also giving everything in their endeavours to try to make the new CAP work for Scottish agriculture.