Farming and food runs deep through Scotland’s veins. With two-thirds of the country’s land mass under agricultural production, an estimated 65,000 people are directly employed in the industry, with one in 10 of all Scottish jobs dependent in some way on farming.
With the image of the very best Scotch Beef or cheeses helping boost the country’s profile around the world, there is no doubt over the importance the industry holds back home.
And yet for all farming’s value, up to 85 per cent of the country where the food is reared or grown is classed as being in a Less Favoured Area – an EU classification meaning the farmer of that land is at a natural or geographic disadvantage.
It means the level of support for farmers is constantly under close scrutiny and from Scotland’s point of view, the need for a Common Agricultural Policy (CAP) that helps support both farmers and the industry is as strong as ever.
This year, after nearly two years of negotiations between the European Commission, the European Parliament and the Council of Ministers, an agreement was finally reached in June this year on a reform of the CAP up until 2020.
The deal, formally adopted by the European Parliament in November, includes a shake up of the how payments to member states are classified and aims to make it greener, more efficient and fairer to all farmers across Europe.
Scotland, as well as the other devolved nations in the UK, will be able to instigate its own specific CAP, allowing ministers to take into account Scottish needs.
There is much to do. Scottish farmers will be moving to a system where payments are based on the area of land they are farming, rather than the historic-based payments, based on what they were producing for the years 1999, 2000 and 2001.
It also wants to ensure that new entrants to farming are able to get access to the same benefits as those already in the system – as under current rules, they have been locked out and one of the big aims of the new policy is to encourage more young people into farming.
Also under the new scheme, the Scottish Government will be looking at closing the loophole that allows the so-called ‘slipper farms’, where payments are made for areas of land that have either changed use, or even no longer used at all – with the owners sometimes packed up, retired and living elsewhere.
The CAP as it appears today is already far removed from its original purpose.
Launched in 1962 in a Europe that was still recovering from the days of rationing from the Second World War, the policy was drawn up to increase agricultural production, giving European citizens affordable food and farmers a fair standard of living. By the 1980s, with food production soaring and the scandal of butter mountains and wine lakes, the nature of the CAP changed.
The current policy, which is set to run from 2014 to 2020, now includes ‘greening’ measures, aimed at better management of the countryside and encouraging greater biodiversity.
Conservative rural affairs spokesman Alex Fergusson said the changes are “hugely significant” in Scotland: "On the historic-based payments, the bulk of the support goes, as would be logical, to the most productive parts of the country, broadly speaking, the south and the east.
“Under area-based payments, you are talking about potentially a seismic shift of support away from the most productive areas which are probably the most intensively farmed to the less productive areas, or the most expensive areas – which is effectively the north and the west.”
One simplistic proposal is to separate the country based on its geography – ranging from hill and mountain regions, through to prime arable land.
However, although there has been debate on this point, Fergusson agreed there had been “a reluctance to talk about the minutiae” until the Scottish Government put forward firm proposals on how its own ‘Scottish CAP’ would work.
Funding through the CAP is separated into two pillars, the first being payments directly to farmers, which the UK will receive just over €3.5bn to be divided among the devolved administrations. The Pillar 2 payment, which goes towards rural development programmes and the UK will receive €2.6bn.
Just how this money will be allocated will be explored in government consultations on the separate pillars, which were both due to have been launched by early this month (December).
With Scotland receiving about €130 per hectare for Pillar 1 per year and an estimated €12 per hectare for Pillar 2, the key thrust of the debate has so far been based around a concern over a lack of funding.
George Eustice, who was appointed Parliamentary Under-Secretary of State for Natural Environment, Water and Rural Affairs in October, said he believed the Government had negotiated the “best deal possible” for the UK, including Scotland.
“I hope that the people in Scotland will recognise that the UK Government negotiated a good deal for them,” he said.
“For the first time after this new settlement, there’s actually flexibility for Scotland to decide exactly how it wants to implement the CAP.
“We’ve gone out of our way to create opportunities for the other constituent parts of the UK to actually implement the CAP in a way that suits them.”
Despite complaints that the levels of subsidy for Scotland do not match elsewhere in Europe, Eustice said: “Many of the East European countries have complained for a long time that they haven’t had the same levels of payment on their single farm payments. And there’s always been wide variance in payments on Pillar 2, so I think the idea that the CAP is there to deliver a level playing field has always been something of a fallacy.
“What we ought to be trying to do with the CAP is make sure that it promotes a competitive agriculture and that’s why we’ve been quite keen to move more money into Pillar 2 where it can support grant funding both for the agri-environment schemes that we’ve got a great track record in but also in investment, to promote farm competitiveness.”
Part of the new CAP is convergence payments to ensure that no country receives less than an average rate of €196 per hectare by 2019. The UK will receive €229m and Scottish politicians argued that this should all go north of the border because of the low-funding of Scottish farms – but instead it is being divided proportionally between Scotland, England, Wales and Northern Ireland.
One of the justifications for this is per farm, Scotland receives more, even though per hectare, its payments are so much lower.
SNP MEP Alyn Smith, one of two Scottish politicians who sat on the EU Agricultural Committee which debated the CAP, said efforts would continue to reverse this, but that while the Scottish Government would now be coming up with its new proposals for implementation, the funding was not a good deal.
He said: “It is absurd. It is patently not [a good deal].We can live with it, that’s as strongly as I’d put it but we could patently have done better.
“The UK attitude on CAP was save the rebate, never mind anything else. That’s a ruinously short-sighted position. The Treasury drives the UK position on pretty much anything in Brussels.”
Lib Dem MEP George Lyon highlighted that the UK Government had negotiated a two per cent rise in direct payments, which Scotland would be entitled to a share of.
And he said he welcomed the offer from the UK of extra entitlement to coupled payments – which allows payments to be made for the production of a particular crop or type of livestock.
However, despite the funding fears, the Scottish Government has been urged to deliver the best possible CAP it can.
Jonathan Hall, director of policy at NFU Scotland, said: “The facts of the matter are we are right now in the position where Scotland essentially has to start making decisions about how it’s going to implement the CAP package deal that has already been decided and agreed at a European level.
“We can complain about funding, and yes, we could do with a much better budget for both direct payments and for rural development, but we will have a budget and we now have best to spend that money.”
Hall said that the money, the changes to the way the payments are calculated and the diversity of Scottish agriculture and landscape, would make it a challenging task but said that meant the funding would have to be “spent wisely”, targeted as much as possible at the areas that needed it most.
Although the new CAP is due to start from 2014, in practice, it will be a bridging year, with the policy being rolled out in full from 2015.
But Hall said: “There is a ticking clock here; we are now reaching the end of 2013. We have to have a thorough look at what the Scottish Government is proposing and we need to make sure it’s deliverable.
“We need systems to be in place from the Government’s point of view, we need clear guidance for farmers and crofters and we need the right policy decisions to be made so that we utilise that budget effectively to get the most out of productive agriculture but also, agriculture that safeguards the environment, produces food and underpins communities in rural areas and all the rest of it.”
He added: “Putting all that into practice will take months and months, because there’s an awful lot of work to be done and we really need to just be getting on with it.”
Under the terms of the new CAP, 30 per cent of the Pillar 1 payments will be for greening measures.
Hall said: “There is little or no support from the farming community for things like greening. Greening, in a sense, was a bit of a political sop to secure a Pillar 1 budget at European level.
“In Scottish agriculture terms, we have a very green agricultural environment, we don’t have issues of monoculture, we have what they call ecological focus areas –stand on any hillside in Scotland and you will see a whole mosaic of land use.”
He added: “We recognise that greening is now here, and we want it to deliver something over and above the straightforward standard – otherwise what is the point in having it and it’s got to be practical in its implementation – the Scottish Government is in exactly the same place as us on that.”
Inevitably, reforming the policy will mean changes to payments, meaning, some farmers and landowners could find themselves with larger payments while others get less.
Hall admitted there would be redistribution of support, and while he said it was impossible to ignore this, added: “We have this support package available to us. How do we best utilise it to make sure that individual businesses are best-placed to continue and operate in the most prosperous environment to them, so that in the longer term, the Scottish agricultural industry is in a much better place because of the delivery of its support?”
He said: “Getting that right is impossible but we must attempt to get to that position.
“If we just leave it to chance then I think it’s a disaster for Scottish agriculture, if we get it right, I think we’ll have a very prosperous and a very bright future.”