Scottish Government

PART 2

CONTENT OF THE SCOTLAND RURAL DEVELOPMENT PROGRAMME 2007-13

18. Rural Scotland has a diverse natural environment and wide variations in the conditions facing its communities and economy. We propose, therefore, that the 2007-13 SRDP should set clear national policy objectives while incorporating flexibility in the design and delivery of schemes to respond to local and regional needs and priorities. We also wish to implement a Programme that delivers co-ordinated support schemes to rural areas and that allows innovation to flourish. Underpinning all our proposals is the principle of sustainability whereby measures achieve complementary outcomes - whether economic, social or environmental - and avoid net damage to the natural and cultural environment.

19. In addition to these high-level considerations, we propose that the selection of measures for support in the SRDP be guided by the following principles.

• There should be evidence to justify funding.
• Support should be targeted at areas, sectors or communities where there is a demonstrable and significant need.
• There should be no duplication through other funding streams such as the EU Structural Funds; indeed measures should complement other initiatives and be consistent with local authority plans and local economic strategies.
• Funding should be the most appropriate solution, either in terms of building capacity or supporting projects.
• Funding must deliver outcomes that would not happen otherwise and make a significant and, wherever possible, measurable improvement.
• Funding must be delivered at a reasonable cost and ensuring proper accountability for the resources that are spent.

20. The measures that are selected for the 2007-13 SRDP must comply with the Rural Development Regulation. We will establish a programme of schemes that will build on the quality and competitiveness of farming and forestry and deliver environmental, economic and social benefits for the people and communities of Scotland. The Programme will include measures that can be used to support businesses across the rural economy, including such important sectors as tourism. The Programme will also recognise the high costs and poor access to markets faced in upland and remote areas.

21. We propose that the following schemes provide the main building blocks for the SRDP, although there is also scope to incorporate 'stand-alone' schemes that are best delivered through other mechanisms:

• Less Favoured Area Support Scheme ( LFASS);
• Land Management Contracts ( LMCs); and,
• LEADER.

Less Favoured Area Support Scheme ( LFASS)

22. As noted in the consultation paper on the Strategy, the Less Favoured Area Support Scheme ( LFASS) contributes to maintenance of economic activity and traditional agricultural landscapes through continued use of agricultural land. It falls within Axis 2 of the new RDR. Less Favoured Areas ( LFAs) are an important feature of land-use in Scotland, where they cover 85% of agricultural land. The active management of this land will continue to be necessary as a foundation for the delivery of many of the actions identified under the three themes of the Strategy, including economic and community goals.

23. Pending the outcome of an EU-wide review in 2008, the new Regulation has delayed implementation of major changes in LFA support until 1 January 2010. In general terms, the articles under the RDR for 2000-6 (Regulation 1257/1999) that currently apply to LFA support will continue to apply during the years 2007, 2008 and 2009. We propose that Scotland should have an interim LFA scheme from 2007 until 2009, with limited changes prior to the introduction of a new scheme in 2010. We have been working with stakeholders to explore options on how best to achieve this. In addition, we have commissioned an evaluation of LFASS in Scotland to help inform the way forward from 2010.

24. The proposed interim scheme will use 2006 as a reference year to determine payments per hectare from 2007 to 2009 and the 2005 Single Application Form ( SAF) to determine eligible areas. For example (and subject to any adjustments noted below), a land-holder receiving £2,000 for 100 hectares in 2006 would receive £20 per hectare for that land in 2007, 2008 and 2009. Whilst this "historic payments" system would be similar in some ways to the Single Farm Payment, it is important to note that payments would be tied to the land which earned the payment in 2006, and was declared in the 2005 SAF, and would be payable to the current occupier of that land, provided he or she met the scheme requirements. During this interim period, there will be no change in the basis for designating land for LFA support.

25. We propose to introduce safeguards to ensure that payments are only made to those who are actively farming the land, but, if possible, defining eligible activity without being over prescriptive about how the land is being farmed. Farming activity in LFAs is mainly associated with extensive grazing of cattle and sheep. Therefore, a possible approach to gauging continuing activity might be to continue to ask for details of livestock numbers (as declared on the Single Application Form) as a guide to inspection selection. Applicants would also need to continue to fulfil the environmental controls that apply to the present scheme and (in order to satisfy the requirements of the new Regulation) would need to maintain the land in Good Agricultural and Environmental Condition and respect cross-compliance ¹, as defined in Regulation ( EC) 1782/2003.

26. At present, spending on LFASS amounts to £61 million per year and is paid to approximately 13,000 farmers and crofters. About 18% of LFASS payments are made to farmers or crofters in "very fragile" areas (namely islands), 25% are paid to farmers or crofters in "fragile" areas (mainland areas of disadvantage and high transport costs) and the remaining 57% are paid to farmers in "standard" areas (areas with lower transport costs). A number of stakeholders have stated that the current distribution of payments gives insufficient weight to the permanent disadvantage faced in "very fragile" areas. Given that the scheme for 2007, 2008 and 2009 is an interim scheme, radical changes are not being proposed. We do, however, propose to make some modest changes to give greater weight to "very fragile" areas. This can be done in a cash neutral way by reducing payments in "standard" areas, while increasing payments in "very fragile" areas, and increasing the minimum payment for holdings with at least 10 hectares of eligible land.

Land Management Contracts

27. The reform to the CAP in 2003 provided the opportunity to introduce a new approach to delivering support to rural Scotland, namely Land Management Contracts ( LMCs). LMCs will occupy a central role in the 2007-13 SRDP. Their full introduction will contribute to a sustainable, prosperous land-based sector which plays a key role in rural development and to achieving high standards of land stewardship. It will make payments for the delivery of environmental, economic and social benefits. The full LMC concept has 3 tiers:

• Tier 1 - Single Farm Payment and cross compliance - securing a basic level of environmental protection, food safety and animal welfare;
• Tier 2 - LMC Menu Scheme - delivering widespread benefits leading to economic, social and environmental improvement; and,
• Tier 3 - under development for 2007 - providing tailored benefits leading to economic, social and environmental enhancement.

The Tier 1 Single Farm Payment provides support that is "decoupled" from food production, encouraging farmers and crofters to make business decisions in response to market conditions. Tier 1 will not form part of the SRDP and is not discussed further in this document. The aims of Tiers 2 and 3 are to provide support to a broader range of land-based activities, including the farmed environment and forestry, and to support other sustainable activities in rural communities.

28. We propose to move to a system where LMCs become the principal gateway to support for land management, business development, diversification and wider rural development measures. Our aspiration is that LMCs enable the Scottish Executive to deliver many of its broad-ranging priorities for rural areas and to achieve a cross-cutting approach to implementing actions across the Axes of the RDR. For example, agri-environment measures on wetland biodiversity can deliver benefits relating to water quality, flood management, soil quality, climate change and tourism. Some measures can also deliver benefits that cut across the Axes; for example, improved nutrient targeting can deliver other environmental benefits under Axis 2, such as improved air quality, and also reduce costs, thereby contributing to the competitiveness objective of Axis 1.

29. We have been working closely with partners - including Forestry Commission Scotland and Scottish Natural Heritage - to implement a common integrated approach to LMCs. In addition, the LEADER approach may support some of the objectives of LMCs, providing support for wide-ranging innovative and community-led projects that come within the scope of the three Axes in Regulation 1698/2005. More detail on the approach to LEADER is provided in Paragraphs 40 to 46.

30. The guiding principles of LMCs are to:

• deliver broad economic, social and environmental policy objectives through an integrated approach to land management;
• provide the basis for moving towards a 'one stop shop' for land managers and other rural actors and a joined-up approach to the administration and delivery of rural funding by the Scottish Executive, its agencies and Forestry Commission Scotland;
• work in partnership with Scottish Enterprise and Business Gateway to promote LMCs;
• focus on sustainable land management outcomes, the delivery of public goods and strong rural businesses and communities;
• be available to a wide range of rural businesses (primarily land managers, e.g. farmers, crofters, foresters, sporting estates), whoever is best placed to deliver desired outcomes; and,
• learn from the best parts of existing schemes.

31. A suite of national objectives for LMCs (see Annex C) has been developed with relevant policy colleagues and with stakeholders based on existing policies and the strategic outcomes of the Scottish Executive Environment and Rural Affairs Department ( SEERAD). These objectives fit within the objectives of the Strategic Plan for the SRDP and provide the framework for Tiers 2 and 3 of LMCs.

Measures

32. We are working to develop the measures that could be delivered through LMCs. Most of this work is being applied to the development of Tier 3, although we are also considering new Tier 2 measures. We will select measures based on their contribution to SEERAD outcomes and policy priorities as set out in the Strategy. The measures that we propose to be considered in LMCs are set out in Annexes D and E. Annex D lists the types of measure and places these in a strategic context by relating them to strategic themes, policy objectives and the relevant Axes in the RDR. Annex E provides more detail by listing the individual measures and giving a brief description of each. The measures have been worked up through discussions with partners and stakeholders, in particular through the work of three Technical Working Groups that comprise experts from a broad range of government and non-government organisations with a role in rural Scotland. Each of these measures has the potential to contribute to meeting our priority objectives. However, given finite financial resources, we consider that it will be necessary to select from that list those measures which will make the clearest contribution to achieving these priority objectives.

33. We are also examining existing schemes, including those addressing agri-environment, forestry, business development and diversification, processing and marketing and wider rural development objectives. Bringing these into LMCs, in whole or in part, and with suitable adjustment, would provide more flexibility in developing applications for support that provide multiple benefits. It would also mean an easier approach for applicants and more efficiency in delivery. It would allow a wider LMC approach to better meet the policy objectives of the new SRDP. The specific schemes ² which are being considered, all or in part, for incorporation into LMCs are shown below and are described in more detail in Annex F:

• Rural Stewardship Scheme;
• Organic Aid Scheme;
• Farm Business Development Scheme;
• Agricultural Business Development Scheme;
• Scottish Forestry Grants Scheme Farmland Premium;
• Scottish Forestry Grant Scheme (in part);
• Scottish Natural Heritage Natural Care Scheme (in part);
• Crofting Counties Agricultural Grant Scheme;
• Crofters Cattle Quality Improvement Scheme;
• Crofting Counties Development Scheme;
• Agriculture Processing and Marketing Grants; and,
• Scottish Rural Partnership Fund.

34. Our proposals for incorporating these schemes with the LMC mechanism are intended to provide a co-ordinated system of support directed at delivering policy objectives. However, it is important to note that theses schemes currently deliver important outcomes, in some cases for land managers and businesses in specific areas and/or activities (for example, crofting and forestry). We do not intend our proposals to compromise spending on the outcomes currently achieved by these schemes.

35. We are mindful that LMCs may not be an appropriate mechanism for certain schemes and actions. For example, SNH will still undertake individual management agreements with land managers, in particular where compensatory or one-off arrangements are necessary. Other schemes may be less directly concerned with land management; for example, agriculture processing and marketing grants include support for facilities in urban areas (drawing on Scottish food production from elsewhere) and may sit more comfortably outside LMCs. Further, Forestry Commission Scotland will continue to administer stand-alone measures within the SRDP including the Strategic Timber Transport Scheme.

Tier 2 - LMC Menu Scheme

36. The LMC Menu Scheme was introduced in 2005. There are currently 17 measures available to land managers through the Menu Scheme ( see Annex E). The design of the scheme is simple with prescriptive measures and set payment rates that require limited planning. Participation is voluntary, as is the selection of measures at present. The measures cover economic, social and environmental issues. Over 10,000 land managers applied to the scheme in 2005 and are currently undertaking a good spread of measures across the country. The scheme is non-competitive, there is no approval process and individual land managers (and common grazing committees from 2007) can participate within the limit of their individual allowance. The allowance is currently calculated as follows:

37. Further Tier 2 measures are being considered for 2007. These are also set out in Annex E. We are carrying out a detailed review of the Tier 2 Menu Scheme in the coming months in order to see if improvements are required. The review will take account of recommendations from an analysis of the scheme that was commissioned in 2005.

LMC Tier 3 proposals

38. A major proposal for the 2007-13 SRDP is the introduction of Tier 3 of LMCs. Tier 3 will be competitive, with a range of measures available to both individuals and groups. It will target funding towards delivering the national objectives contained in Annex C and will take account of regional and local priorities.

Standard capital items

39. The current schemes operated by SEERAD, Forestry Commission Scotland and Scottish Natural Heritage include payments for a wide range of different capital items (for example stock fences, restoration of dykes and eradication of rhododendron). Generally, payment rates, and the specification for individual items, vary from scheme to scheme. For agri-environment schemes, payment is based on standard payment rates. By comparison, the Scottish Forestry Grants Scheme applies a percentage to a Standard Cost. These differences in approach lead to differing payment rates and is not helpful to land managers and advisers. As part of this overall process of integration and simplification, we propose to produce a list of capital items to be funded through the SRDP with an agreed standard payment rate for each item. This will take the form of a Standard Payment Booklet. A list of the proposed capital items can be found at Annex G.

LEADER

40. A significant change under the new Rural Development Regulation is that the EULEADER programme ³ will be brought within the remit of Rural Development Programmes. This change provides for LEADER to form a mainstream part of the SRDP. The inclusion of LEADER provides significant flexibility for the SRDP to support diverse and innovative activities. The Regulation states that LEADER should contribute to the priorities of Axes 1 and 2 and in particular to Axis 3 although projects do not have to fit necessarily within a specific measure identified in the Regulation. Support through LEADER offers the opportunity to achieve outcomes that cross the three Axes, by supporting gains in competitiveness, environmental quality and new business activities, as well as improvements in the quality of life. LEADER should also improve the capacity of local communities to initiate and manage projects, thereby enhancing their potential to sustain locally-based development. In this context, a key focus of LEADER in 2007-13 will be to facilitate capacity-building and locally-based action in rural communities that can be sustained in the future.

41. LEADER is a locally-based approach to economic and community development within rural areas. It is a bottom-up local engagement process through which resources are targeted at those rural areas identified as most in need. Such need might be as a result of socio-economic and demographic factors including levels of employment, population levels and the age profile of local communities. Remoteness and/or fragility also play a significant part. LEADER is currently administered by Local Action Groups which comprise local partnerships of government and non-government organisations and individuals active in local development processes.

42. Regulation 1698/2005 states that the LEADER approach for 2007-2013 must have the following elements:

43. Delivery of LEADER must be via a partnership approach through LAGs which propose an integrated local development strategy and which are able to demonstrate the ability to define and implement such a strategy. LAGs must be made up of up to 50% public agency partners and more than 50% socio-economic partners (not from the private sector). We propose that LAGs be aligned with the Regional Project Assessment Committees that have been presented in Paragraphs 55 to 57. This will help to achieve co-ordination and consistency between the activities of these bodies, and particularly with the community planning partnerships with which the LAGs need to be better linked. It will ensure that every part of rural Scotland has the opportunity to participate in this form of community development, while still respecting the needs of the more deprived areas.

44. All of rural Scotland is potentially eligible to engage in the LEADER approach in the 2007-2013 programming period. The European Commission has established demographic limits to guide the size of the areas covered by LAGs. An individual LAG should have a minimum population of 10,000 and a maximum population of 100,000 people. These limits aim to ensure each LAG has adequate human, financial and economic resources ("critical mass") to support efficient and effective delivery of projects while retaining the local approach that lies at the heart of LEADER. The Commission has indicated that there will be some flexibility in population levels where the population of a clearly defined LAG area is close to the prescribed limits.

45. As indicated in Paragraph 16, at least 5% of the European element of the SRDP budget must be spent using the LEADER approach. Resources have been transferred from the Co-operation element of the Structural Funds to the EAFRD for this purpose. We will also consider how other funds currently managed by SEERAD could be delivered through the LEADER approach. This would place more responsibility with local community planning partnerships and LAGs to co-ordinate priorities for locally-based development, whether economic, social or environmental in nature.

46. LEADER will become an integral part of the 2007-13 SRDP and will have a significant role in contributing to SEERAD outcomes. Responsibility for LEADER will transfer from the Scottish Executive's Enterprise, Transport and Lifelong Learning Department to the Rural Development portfolio in SEERAD. It is proposed that LEADER should encourage the implementation of integrated, high-quality and original strategies for sustainable development and that there should be a strong focus on partnership and networks of experience. It is expected to prioritise projects featuring innovation or co-operation but may also address small-scale social needs such as youth and developing communities.

Rural Development Frameworks

47. We believe that support provided to land managers and other rural businesses should be co-ordinated in a way that adds maximum value in terms of business competitiveness and wider economic, social and environmental outcomes, as envisaged for Tier 3 of LMCs. To ensure that this integrated approach is readily explained in applications and easily monitored, we propose that every application for Tier 3 of LMCs will be associated with a Rural Development Framework, explaining the specific approach to land management planning.

48. This approach is a feature of some existing schemes, whether in the form of a business plan, an organic conversion plan or an environmental audit. As a natural extension of the integration of measures we propose for Tier 3, we have been considering ways to create a set of basic business/project planning arrangements for LMCs to replace the existing mixture of approaches to planning. We believe our proposed new approach is "sufficient for purpose". It avoids the need for applicants to provide the same information repeatedly when applying for different schemes and is based on a single form where applicants provide the information necessary to explain why they are seeking funding and what the funding will deliver. This Rural Development Framework would be modular in design with a generic section for all applicants to Tier 3 and a series of optional sections (or modules) to be completed depending on the measure or measures for which funding is being sought. Applicants would only complete the modules relevant to their application.

49. We propose that this approach be described as Rural Development Frameworks, rather than Land Management Plans as has been previously suggested. We believe that this reflects more closely the aims of the approach; specifically, to act as an aid in developing integrated management of land holdings and rural businesses - compatible with the principles of sustainable development - and not to impose bureaucratic burdens on these businesses. The inclusion of an appropriate Framework will be a condition of applying for support under Tier 3.

50. Integrating different activities across a holding or business is at the heart of the LMC concept and a fundamental objective of Rural Development Framework approach. However, many of the outcomes desired from LMCs will only be delivered by co-operative actions across a number of holdings. Particular examples include better water quality, flood management, improved public access, tourism ventures and environmental improvements on a landscape scale. We propose that the processes for planning and developing LMC applications will include a mechanism to encourage co-operative applications that achieve improved co-ordination.