Preparing for a no-deal Brexit: Agricultural Policy and Funding

On 23 August the UK Government began publishing technical notes on the effect of a no-deal Brexit. These notes are intended to provide guidance to citizens, businesses, public sector bodies and Non-Government Organisations in the United Kingdom on how to prepare for the possibility of the UK leaving the EU next March without concluding a Withdrawal Agreement. It is expected that around eighty technical notes will be published in total. Over the next two months SPICe Spotlight will provide analysis and comparative information on a number of these. The first blog provided an overview of the UK Government’s Preparations for a no-deal Brexit.

Scottish agriculture and rural communities will benefit from over £564 million in EU Common Agricultural Policy (CAP) funding in 2018/19.

When the UK leaves the EU, it will leave the CAP, and lose access to this funding. This blog considers funding and policy for agriculture and rural communities in Scotland, both now and in the coming years.

The Common Agricultural Policy in Scotland

Figure 1 shows the schemes under the two pillars of the CAP in Scotland, during the period 2014-2020.

Figure 1. Common Agricultural Policy in Scotland

Sources: Adapted from Audit Scotland 2016 using Scottish Government draft budget 2018-19, UK Government 2013, SPICe Briefing 16/89, UK Government technical notes, Scottish Government pers comm.

UK Government funding commitments

Last week the UK Government published two farming related technical notes on preparations for a no-deal Brexit:  

These notes repeat guarantees about CAP funding but offer no additional clarity. There are two main funding commitments.

First, “the government has pledged to continue to commit the same cash total in funds for farm support until the end of this parliament, expected in 2022: this includes all funding provided for farm support under both Pillar 1 and Pillar 2 of the current CAP. This commitment applies to the whole UK.

This seems to guarantee Pillar 1 funds to 2022 although there are at least 2 issues that are unclear.

  • What is meant by “farm support”? And which Pillar 2 schemes are considered farm support?
  • What is meant by “the same cash total… until 2022”? And how this relates to the allocation of CAP funds by the UK Government for the 2014-2020

Second, “the UK government has guaranteed that any projects where funding has been agreed before the end of 2020 will be funded for their full lifetime … The guarantee also means that Defra and the devolved administrations can continue to sign new projects after the UK leaves the EU during 2019 and 2020, up to the value of programme allocations.”

This seems to guarantee all Pillar 2 funds to the same extent that they are guaranteed now under the CAP, since the current CAP programme ends in 2020. A new EU CAP programme is being developed, without the UK’s participation.

 So, the UK Government has guaranteed Pillar 1 schemes and any Pillar 2 schemes classed as “farm support” until 2022. It has guaranteed Pillar 2 projects signed before 2020 for the lifetime of the project.

Scottish Government policy and funding changes

In addition to changes due to Brexit, Scottish Government has revised agricultural policy and funding within the current CAP programme.

The Scottish Government revised the Scottish Rural Development Programme in August 2017, cutting its contribution by around £124 million. The EU contribution remains the same. In the revision, funding for some schemes such as the Beef Efficiency Scheme reduced significantly, whilst others such as the Forestry Grant Scheme increased. The amounts shown in Figure 1 are the revised budget for each scheme. 

The Less Favoured Area Support Scheme (LFASS) is another area of change and uncertainty. LFASS “is vital for our rural economy and remote communities throughout Scotland, providing support to over 11,000 farmers and crofters (Cabinet Secretary for the Rural Economy, Fergus Ewing).” 

In 2018-19 it will provide around £65.5 million to farming businesses in remote rural areas. This must be reduced to around £13 million in scheme year 2020 (20% of current funding) because of EU rules.

Figure 2. Less Favoured Area Support Scheme funding between 2015-2020

Source: Scottish Government draft budgets and PQ S5W-10973, August 2017

Under CAP rules, Member States had the option from 2019 of either continuing to operate an LFASS scheme on a reducing financial scale, or replacing it with an Area of Natural Constraint scheme. The Scottish Government chose to continue with the LFASS scheme, so the funding available must reduce.

Cabinet Secretary for the Rural Economy, Fergus Ewing said “Clearly the prospect of a 20% payment is one that will have a significant impact on farmers and crofters in Scotland’s remote and fragile farming areas … Scottish Government officials are actively exploring all possible options to maintain vital LFASS support to the industry in 2020.” 

At the time of writing, no replacement for the scheme had been announced.

Whilst LFASS funds are reducing, other SRDP schemes have closed altogether. It was announced on 20 August 2018 that the New Farmers Entrants Scheme will close from 31 August 2018. The schemes objectives have been “met and exceeded”.  The NFU Scotland states that “the sudden closure of the New Entrant Capital Grant Scheme only adds to the uncertainty within Scottish agriculture.”

In March 2018 it was announced that the Young Farmers and New Entrants Start-up Grants schemes were to close. This was because “the 2014-2020 SRDP allocation of £14m has now been fully used”.

Longer term agricultural funding and policy

Whilst the UK Government has made short-term guarantees on replacement of CAP funding, no commitments have been made about funding for agriculture beyond this UK parliament.

Cabinet Secretary for the Rural Economy Fergus Ewing said “During the referendum, promises were made to farmers that they would continue to receive at least the same level of funding as they currently do in the event of Brexit… These papers [the technical notes] fail to confirm that this will indeed happen…”

 Mr Ewing also highlighted the UK Government’s lack of a long-term commitment to funding. He said that the technical notes “provide little reassurance that the UK Government has robust plans in place to provide longer term support for agriculture…”

Whilst the UK Government has been criticised for failing to commit to long-term agricultural funding, the Scottish Government has been criticised by stakeholders for failing to provide a long-term vision for agriculture in Scotland. NFU Scotland and Scottish Land and Estates said plans for a transition period for agricultural policy (Stability and Simplicity) stops “short of what is required when it comes to a future vision.” 

Conclusion

Given all this uncertainty, one thing is clear: that land managers and rural communities are operating in an increasingly difficult policy and funding landscape, as they strive to remain viable and thrive.

Wendy Kenyon, SPICe Research