Where is agricultural subsidy best placed? One of the first jobs of the new European Commission, like the Parliament, starting a 5 year term in Autumn 2009, will be rebuilding the Common Agricultural Policy (CAP). It was agreed before the recent European elections that this policy was in need of radical reform. The current policy will run until after 2013, by which time a new and agreed policy will be ready to replace it.

But what will it be? The next couple of years are going to be a pressured marriage of think tank and manic lobbying by vested interests.

Richard Lochhead, Cabinet Secretary for Rural Affairs, is working to put Scotland in a position ahead of the game for these negotiations. Very particularly, he is focused on being able to demonstrate that Scotland’s internal management of the Single Farm Payment (SFP) is ‘delivering support for those who need it most and is producing tangible public benefits’.

At the moment, the SFP annually distributes about £450 million to Scottish farmers.

To ready Scotland to make its case in the run up to CAP reform, Lochhead has just set up a Single farm Payment Inquiry, with Brian Pack as chair.

The inquiry is part of a wider package of measures aimed at supporting agriculture and the rural economy. Its job is to ensure financial support for Scotland’s farms, specifically through the important Single Farm Payment – the European Union’s principal agricultural subsidy.

The main focus of the SFP is that it gives farmers greater freedom to farm to the demands of the market as opposed to European production targets. Through the SFP, subsidies are no longer linked to production and environmentally friendly farming practices are better acknowledged and rewarded.

The Minister’s inquiry will produce an interim report by the end of this year and its final recommendations by Easter 2010.

Relevant paragraphs governing its work and laid down by the Minister are:

‘The Inquiry will take account of the large proportion of land in Scotland which is within the Less Favoured Area classification; the particular role played by the grazing livestock sector; and the important contribution which responsible land management can make to the condition of our natural environment and the economic and tourism benefits which that provides.

‘In making its recommendations, the Inquiry will take into account the operational feasibility and administrative costs associated with them, and the desirability of reducing costs and complexity not justified by outcomes’.

Part of the work of the inquiry, in Frank Field’s famous words, is ‘to think the unthinkable’. In the the framing of the inquiry a major direction of its focus is: ‘how to address the risk of a smaller Single Farm Payment budget for Scotland after 2013, taking into account the generally-held expectation of severe pressure on that part of the EU budget’.

The vigour of this direction is reminiscent of the work of the Committee of Industrial Organisation  (CIO) in the Republic of Ireland in the 1960s. This looked without sentiment at each of Ireland’s major industries – many of which survived only behind the protection of massive tariff barriers. It successfully recommended the complete dismantling of those which would not survive in the free trade conditions that applied to the then European Common Market which Ireland had set itself to join.

Scotland is in nothing like that position, of course, However, Lochhead’s forethought in pointing the SFP Inquiry to consider the scenario of a smaller SFP budget is similarly designed to protect this country’s agricultural economyby strategically attuning it in advance to the circumstances in which it is likely to operate.

Mr Lochhead has set the inquiry specific issues to address, including the link between payment levels and farming activity, the situation with new entrants to farming and future conditions to be attached to the payments to ensure public benefits in line with payment levels.

A key issue is likely to centre on the fact that SFP payments are currently made to the farmer and not the farm. This is – and has been – open to abuse. In the arcane way such regulations work, it means that a farmer could sell a farm, or a farm lease today and continue to receive the Single Farm Payment her or himself until 2012, when the new CAP arrangements will come into play.

This is inherently unjust. It delivers significant subsidy to people who, on occasion, abuse the purpose for which it is intended, sell their farm or lease and use the SFP to fund their lifestyle or develop thier personal wealth. It also leaves the incoming farmer, often a new entrant to the industry, struggling to survive in a way that the SFP is centrally designed to ease.

Tying the payment of the SFP to a farm rather than giving it to its farmer has to be a better targeted way of ensuring that the subsidy achieves its purpose without manipulation.

A lot will be clear when Brian Pack’s Inquiry delivers its interim report by this December. Richard Lochhead is to be congratulated for setting about Scotland’s management of the SFP in good time and by setting  vigorous schedules within which his inquiry is to operate.

Related Posts

• The Buteman adds to the George Lyon story (1)
• Lochhead’s Enquiry into EU Single Farm Payment and issues raised by George Lyon MEP on his own intentions (1)
• New Lib Dem MEP, George Lyon, in farming mysteries and clarifications (1)
• Lochhead’s high level Brussels meetings today set out Scotland’s priorities (0)
• NFU honours Mull’s Bert Leitch with John Miskelly Award (3)

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