D8.1 - Agriculture Reform Programme Regionalisation Options: Synthesis Report

Summary

This report presents analysis of a set of options for updating how Scotland is divided into regions for the purposes of making direct agricultural support payments to farmers and crofters. The research is part of the 2022-27 Strategic Research Programme (SRP) and was conducted by James Hutton Institute staff from the Land Use Transformations project working with Scottish Government (SG) colleagues in RESAS and RPID. The study addressed questions relevant to ongoing analysis within Scottish Government, of post EU-exit agriculture policy options, and builds on previous SRP studies (2008-2021) and collaborations with SRUC and Pareto Consulting.
The analysis assessed: the Basic Payment Scheme regionalisation status quo – three regions, with two of these (R2 and R3) being predominately rough grazing and differentiated by stocking rates; options for merging these two rough grazing regions; and for differentiating between the cropping and livestock areas within the other BPS region (R1). Options for changes to the Less Favoured Area Support Scheme (for disadvantage, LFASS) and Voluntary Coupled Support (per head payments for livestock, VCS) were also tested as part of the study, building software tools that allow the assessment of options for all direct support payments.

Key Findings:

1. Maintaining the differential in payment rates between BPS R2 and R3 is incompatible with the SG aspiration to make 50% of direct payments conditional (via Enhanced Conditionality) as it would mean differences in payment rates for the same activities being undertaken on land that is otherwise functionally identical, except for historic stocking rates.

2. Merging current BPS R2 and R3 only involves 13% of the BPS budget so the degree of redistribution is limited (£25M in total, so £12.5M gain and loss). Indeed, 7,241 businesses are wholly unaffected as they have no R2 or R3 land. For the remainder the degree or relative change is small, 6,826 with less than 20% reduction in payments and of these most have a low magnitude, 4,370 have less than a £500 reduction. Numbers of gaining businesses are not insignificant (n=2,532) and are concentrated in Highland and Western Isles, in specialist sheep businesses.

3. Since BPS R1 is where 87% of current BPS spend occurs, the region is crucial to the delivery of the policy outcomes sought by SG. In addition to merging BPS R2 and R3, splitting BPS R1 between cropping and livestock systems would help to ensure that appropriate Enhanced Conditionality measures are implemented. This would avoid Enhanced Conditionality measures being undertaken only on grasslands and undermining the gains made in the current Ecological Focus Areas within BPS Greening. A key decision remains of how best to treat temporary grasslands, either as part of cropping or livestock systems.

4. The analysis also highlighted that the current LFASS has a distribution of payments similar to that which would be delivered by combining a top-up payment for a merged BPS R2 and R3 with an additional VCS payment for suckler cattle. Being explicit on the share of current LFASS funding that is, in effect, a coupled payment, and paying it via VCS would enhance transparency and allow better alignment between the funding and reasonable delivery expectations, such as improvements in efficiency.

5. Finally, whatever the regionalisation, and other options considered, there will be large numbers of small recipients (9% of current funds go to the 50% of recipients receiving the lowest payments, <£15k each). Having the 50% of recipients with the highest payments deliver 100% of the environmental objectives rather than 91% should thus be possible. They have 4.3M ha of land at their disposal, of the 5.6M ha of land within the IACS payment system (77%), or 3.51M ha of 3.96M ha of the land claimed for BPS (89%). This could mean that that for the remaining 50% of recipients a simpler, light touch, “do no harm” scheme should be possible and where such businesses can cooperate to deliver outcomes (e.g. via the institutions of crofting) then this would enhance the delivery of outcomes via Enhanced Conditionality.