Background

Rural Secretary Fergus Ewing has stated that Scottish farmers will see a 20% cut in their LFASS claims in 2018. This comes after significant pressure from the European Commission to change the scheme. This payment cut is described as a ‘parachute payment’ as it is a softer fall than stopping the scheme completely.

What about ANCs?

The alternative to ‘parachute payments’ would be for the Scottish government to set up an Area facing Natural Constraint (ANC) scheme. But they are not minded to do this in the immediate future. An ANC scheme would be an area-based payment which would see significant redistribution. Critically, the ANC would be unable to base payments on stocking rates or implement the historic ‘cattle multiplier’ used under the current LFASS system. Moreover, an ANC scheme would involve new eligibility criteria with large numbers of farms falling in and out of any new scheme.

Who is affected?

The £65.5m budget for LFASS is shared by 10,990 farmers and crofters. The 20% cut for most businesses will amount to under £1,000. Larger claimants may see their payments reduced further as degressivity will reduce the maximum amount farmers can claim. This threshold is yet to be confirmed.

Where is the unspent money going?

This is the question farmers and crofters across Scotland want answered. The unpaid money from 2018 claimed will amount to around £13m. The Scottish government will redistribute the money within the Scottish Rural Development Programme. Currently Scottish industry bodies are looking at how this money can most effectively reach those businesses who have incurred the loss. It is unclear what shape this will take and if claims will be competitive.

Future of upland and hill farming support

The Scottish government has stated it is unable to guarantee continuing LFASS payments beyond 2019. This is a budget issue as opposed to a legislative one.

NFU Scotland is pushing for continued payments for claims in 2019 and 2020. The EU does allow payments to be made, but they must be at a lower rate. 2020 claims must be paid 20% of the full rate or €25 a hectare (whichever is higher). Claims made in 2019 would be paid at a rate of between the 80% and 20%. NFUS is keen to point out that in theory this could be 79%. Meanwhile, in 2020 there is likely to be strong pressure for a replacement scheme to already be under way.

It is important to remember that while many of these businesses are unable to gain enough income from the market place, they are of critical importance to both their local economies and Scottish habitats. This means the Scottish government is under massive pressure to provide an alternative form of support to these businesses as LFASS is wound down.

How this would look is yet to clear. By 2019 the UK will be out of the EU so may be less beholden to Brussels regulations. However, the detail of any future trading relationship could stipulate a level of commonality in agricultural policy. Furthermore, the desire for the UK to operate a national framework, under which Scottish agricultural rules sit, will further influence any upland and hill farming scheme. Finally, any changes will not be in isolation as all farm support could be modified in post-Brexit Britain.