Should use be made of any of the recoupling options? Please provide views on which of the available recoupling options should be retained and why.
There is no case for any of the partial decoupling options since they maintain the bureaucracy and other disadvantages of the present CAP system, such as the lack of competition and reduced incentives to improve efficiency in production systems. They convey few of the potential benefits of the proposed new approach and they also do not offer best value for public expenditure.

Should use be made of the provision for a national envelope? If so, in which sectors? Please also comment on how the illustrations provided could be developed further, or other ways in which a national envelope could be designed.
Scottish farming will need to make major adjustments to meet the circumstances following CAP reform. This will require the provision of new incentives and support for change. The national envelope should be used to drive this change process and assist the industry in achieving the new priorities, including environmental enhancement and food quality improvement, developing marketing strategies and support initiatives, and to smooth the transition to the new farm payment system. A national envelop might also be used to support categorised special fragile areas such as island crofts.

Scottish farming depends heavily on the animal sector. In 2002 60.3% of total farm output was accounted for by ‘livestock and livestock products’, and of this proportion 60.5% was accounted for by cattle and sheep and 18.6% by milk. The present assumption is that decoupling of CAP will bring the production of these products ‘closer to the market’. However, whilst Scottish production has a high-quality image, and selected types of Scottish beef have a high market reputation, it could be argued that there is very little historic evidence that the livestock industries have been able to respond quickly to increase the quality or their products and meet the demands of the market. Scottish lamb, in particular, remains of very variable quality, and there is room for improvement in much of the non-selected beef sector.

If the competitive strength of the Scottish farming and food industry in its home and export markets is to benefit from the opportunity of CAP reform, the national envelope must be used to improve the quality of livestock products. A range of measures might be considered, including support for technical innovation, and quality enhancement. Additionally, the industry should be given encouragement and financial incentives to introduce consumer evaluation into quality assurance schemes, so that the schemes provide tangible consumer benefits.

In the early 1980s, SEERAD curtailed the meat-production research programmes historically undertaken at the Scottish Agricultural College (SAC) and relevant SEERAD supported research organisations. As a result, while focus has been given to BSA and Foot and Mouth disease, there has been a national under-investment in research and technical development in support of the Scottish meat industry. Whilst, the beef industry remains a substantial export sector, it has fallen from its position of being a technical leader, and this has reduced its competitive position. The importance of the livestock industries should be recognised by SEERAD and long term strategies put in place for animal orientated research.

Rural development and modulation

Should additional rates of national modulation be applied? If so, what rate and for what purposes?
CAP reform will inevitably create substantial change for Scotland’s rural industries and, considered nationally, the options appear either simply to react to the force of change, as necessary, or to embrace change and use it to advantage. Scotland has the capacity to develop more diverse and competitive food production and manufacturing sectors than it has at present, and that would be in the interests of the Scottish economy. There are also important environmental, social and economic (for example through tourism) arguments for a better managed rural environment, and this should be regarded as a positive opportunity provided by CAP reform. In this context, all farmers must have full access to adequately resourced activity-based voluntary land management schemes. Overall, the objective must be to diversify and strengthen the rural economy to ensure its long-term sustainability.

It is recommended that the highest rate of modulation (Option 3) should be adopted, at least 10%, specifically to provide for the re-investment of the funding released to support rural development. This should involve diversified business development, including developments in food processing and manufacturing, targeted agri-environment schemes, woodland creation and enhanced biodiversity, landscape and recreational and tourism initiatives. They could also include the development of small-scale timber harvesting, marketing and processing, including the development of niche markets.

New approaches are required to ensure that the application of funding provides benefits both for farmers and in terms of expenditure of public funds. Land management contracts offer the farm to farm flexibility that is required. However, public priorities need to be created on an area basis (local area, river catchments, or other geographic area) so that individual farm developments have the optimum collective effect on the overall development of an area. Otherwise the opportunity presented by CAP reform is likely to be squandered and the land simply abandoned. In this regard the development and management of integrated rural strategies by local partnerships could provide an exciting way forward.

Operational aspects

How should set-aside be operated in Scotland?
Consideration should be given to whether it is necessary to continue with set-aside in the context of decoupling and the increased flexibility in the development of environmental schemes made possible from the money so released. However if set-aside is to continue, research undertaken by SAC in the 1990s indicated that that the use of set aside could have much greater environmental benefits if used to create contiguous areas (i.e. touching or connected along a boundary). This approach should therefore be encouraged and, together with woodland planting, used to provide wildlife corridors, general biodiversity and landscape improvements, and community green space resources, as appropriate to the locality and along with other agri-environmental schemes. Where farm woodlands are concerned, there should also be recognition that these can and, in the future will, be part of a Long Term Forest Plan, which may cover a whole estate.

In terms of non-food crops, the set aside policy should be designed to stimulate farmers to seek new markets for sustainable products, especially those which could have export potential or could reduce demand for imports. In this context, the University of Dundee is liaising with the Scottish Crop Research Institute, with the University of Wales (Bangor) and with a major Scottish house builder in the use of annually grown crops to form composites for use in construction. If successful, this work could provide commercial benefit for farmers and reduce the demand for construction grade timber, most of which is imported.

In addition, the provision of ungrazed verges of variable width and the protection from trampling of water-edges are important requirements of sustainable land management for wildlife.

Should dairy payments be de-coupled at the same time as de-coupling in the other sectors, i.e. January 2005? For the years in which there will be an ‘additional payment’ (2004 if de-coupling starts in 2005 and the three years to 2006 if de-coupling starts in 2007) in which ways should this money be spent?
Dairying should be decoupled (including the abolition of quotas) in 2005 in line with other sectors. The funding so released should be transferred to the national envelope for the dairy sector. Its initial application should be towards improving the health of the national dairy herd, as part of SEERAD’s recently announced animal health and welfare policy. This would assist consumer assurance about the production of ‘healthy milk from healthy cows’, and in the medium term would become self-financing as the industry gained the economic benefits of reduced disease costs and greater cow longevity. There should be specific initiatives to address the risk of development of cattle TB in Scotland.

In Annex A (Summary of the CAP Reform Agreement) it notes that support under the single farm payment will only be paid on eligible hectares in 2005. In this context it is noted that enclosed heather land is excluded from this hetarage. On many farms in northern Scotland, however, such land is essential for stock production and can also be ecologically rich if not subjected to heavy treatment with chemicals and over-grazing. Failure to mention protection of heather is thus a weakness of the plan..

In Annex C (Introduction to Land Management Contracts), there should be a recognition that Long Term Forest plans are already in existence and supported by Forestry Commission. In one sense, therefore, they are a 'sector' of Land Management Contracts and their place should be recognised. In terms of Permanent Grassland, it is understood that at the European level, a control on change of use of permanent grassland is to be introduced, since at the European level the amount of permanent grassland is limited. In Scotland, however, it is widespread, particularly if the Molinia and Trichophorum moorlands are included. It is important therefore to allow flexibility of land use change over permanent pasture and steps should be taken to seek the necessary derogation.

In responding to this inquiry the Society would like to draw attention to the following Royal Society of Edinburgh responses which are of relevance to this subject: Towards a Development Strategy for Rural Scotland (March 1998); Foresight for Agriculture, Horticulture & Forestry report on Forestry and Wood Products (January 1999); EU policy on Biodiversity (May 1999); Non-Food Crops (May 1999); Study of Environmental Planning (October 1999); Royal Commission Study of Environmental Planning (July 2000); Protecting and Promoting Scotland's Freshwater Fish and Fisheries (August 2000); A Forward Strategy for Scottish Agriculture (September 2000)and the Sixth Environmental Action Programme (May 2001). 

January 2004