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Scotland Rural Development Programme 2007-2013: Rural Development Regulation (EC) No 1698-2005

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CHAPTER 3: SCOTLAND - ANALYSIS OF THE CURRENT SITUATION

This chapter sets the context for the 2007-13 SRDP, and provides evidence to support the content of the Programme. It is structured according to guidance in Regulation 1974/2006 laying down rules for the implementation of the new Rural Development Regulation ( RDR) (1698/2005).

It also provides commentary to support the priorities we have chosen for the Programme (see Chapter 4). These priorities include the new challenges relating to climate change, renewable energies, water management and biodiversity as set out by the European Commission in article 16(a) of ( EC) No 1698/2005 as amended by ( EC) No. 79/2009 and ( EC) No. 473/2009. Since the SRDP was already fully in line with the new direction and priorities of Commission rural policy, amending the programme further to meet the new priorities is unnecessary. The resources identified in the CAP Health Check have, however, been allocated specifically to the four new challenges identified (See Chapter 6). With regard to measures to support Broadband in the Economic recovery package, since the Scottish Government has already identified and met known demand for broadband connections in rural areas through its Broadband Reach Project (established to deliver an affordable, basic broadband solution to households and businesses unable to receive a broadband service) it was judged that the additional, small, allocation from the European Commission would be more appropriately spent on new challenges relating to measure 214.

3.1 Analysis of the current situation including strengths and weaknesses

The current situation in rural Scotland is analysed under five subsections:

  • the socio-economic context;
  • the performance of agriculture, forestry and food sectors;
  • environment and land management;
  • rural economy and quality of life; and
  • LEADER.

Current economic, social and environmental trends in rural Scotland are reviewed, noting regional differences across rural areas, in particular between areas closer to urban settlements and those in more remote locations. Each sub-section provides data on the key issues, which relate to baseline indicators used in the Programme, as well as a summary of strengths and weaknesses. All baseline lead objective indicators are provided and are noted throughout the sections. Further information on indicators is provided in chapter 12 and in Annex 3. This section draws on information from the Ex ante Evaluation and the Strategic Environmental Assessment of the programme carried out under Article 85 of the RDR.

3.1.1 General socio-economic context of rural Scotland

3.1.1.1 Current Situation

Definition of rural areas

Defining rural areas across the EU provides a basis for consistent data collection and analysis and helps to show where support through Rural Development Programmes should be targeted. However, different definitions exist. The OECD classifies rural areas according to population density, using two steps: first, small areas (municipalities) are classified as rural if the population density is below 150 inhabitants per square kilometre; and, second, regions are classified according to the percentage of the population living in municipalities with fewer than 150 inhabitants per square kilometre. This methodology results in regions being classified as:

  • Predominantly Rural regions: more than 50% of the population living in rural areas (with less than 150 inhabitants/km>2);
  • Intermediate Regions: 15% to 50% of the population living in rural areas; and
  • Predominantly Urban regions: less than 15% of the population living in rural areas.

Under this designation, 54.4% of Scotland's territory is Predominantly Rural, 40.6% is Intermediate, and 5.1% is Predominantly Urban. This highlights Scotland's rurality. The OECD methodology is based only on population density and does not take account of remoteness. Remoteness is a particular feature of Scotland's rural areas. For this reason, the Scottish Executive's urban-rural classification 1 is adopted to define rurality in this Programme. This classification uses settlement size and remoteness to classify small areas as rural. Rural areas are defined as settlements with a population of less than 3,000. Based on analysis of drive times to larger settlements, rural Scotland is then split into:

  • Accessible rural areas: those areas with a less than 30 minute drive time to the nearest settlement with a population of 10,000 or more; and,
  • Remote rural areas: those areas with a greater than 30 minute drive time to the nearest settlement with a population of 10,000 or more.

Where statistics are not available by this classification, alternative definitions of rurality are used and are noted. Figure 3.1 shows Scotland using the Scottish Executive definition of rurality.

Demography

Rural Scotland has a relatively sparse population of 16 inhabitants per km 2 compared to 65 inhabitants per km 2 in Scotland as a whole. Population is heavily concentrated in several major urban areas. In 2001, rural areas of Scotland accounted for 98% of the land mass but only 19% of the population. However, the population of rural areas has been growing in recent years, as shown by a 3.9% increase between 2001 and 2004. Population growth has been particularly evident in accessible rural areas where there was a 4.3% increase in this period. These figures hide some trends at a more local level, however, including declines in population in localities in both remote rural and accessible rural areas.

These trends are supported by data on net migration (number of in-migrants minus the number of out-migrants). The net migration figure for rural Scotland was 21,157 in 2004, of which 70% was in accessible rural areas. Rural areas experienced positive net-migration for all age groups from 25-29 onwards, meaning that these age groups moved into rural areas for a variety of reasons including lifestyle choices.

The population of rural areas has an older age profile than elsewhere in Scotland, particularly in remote rural areas. Data from 2004 show that 18% of the rural population is aged 0-14, 65% of the population is aged 15-64, and 16% of the population is aged over 65. In remote rural areas, the population aged over 65 years was 3% higher than the rest of Scotland. There has been a trend of younger people leaving rural Scotland; in 2001, the percentage of the population in the age group 15-24 years was 3% lower in rural areas than in the rest of Scotland. The gender profile of rural areas is slightly more tilted towards males than in urban areas. In rural areas, 49.6% of the population is male (2001 figures) compared to 47.7% in the rest of Scotland.

Figure 3.1 - Rural Scotland using the Scottish Executive's definition of rurality

Figure 3.1 - Rural Scotland using the Scottish Executive's definition of rurality

Economic drivers

Gross Domestic Product ( GDP) is a key indicator of the state of the whole economy. Gross Value Added ( GVA) is another term for GDP at basic prices. In 2003, GVA per head in Scotland was 94% of the UK level, at approximately €22,630 (baseline lead objective indicator 1). Areas of rural Scotland have lower GVA per head than the Scottish average: for example, in 2003 GVA per head for the Western Isles was €15,930 and was €15,980 in the Scottish Borders. Economic growth has been relatively stable in these areas. For example, in Western Isles, GVA per head increased from €13,971 in 2000 to €15,930 in 2003. In the Scottish Borders, GVA per head increased from €13,898 in 2000 to €15,980 in 2003. For Scotland as whole GVA per capita has increased from €19,436 in 2000 to €22,664 in 2003.

Labour market

The labour market is relatively strong in rural areas overall compared to the rest of Scotland, although pockets of unemployment exist. Rural Scotland accounts for 19.7% of employees in Scotland. In 2006, the employment rate (the number of people employed as a percentage of the working age population) was 72.3% compared to 74% in the rest of Scotland (baseline lead objective indicator 2). Of those employed in rural Scotland, 75% worked full-time in 2005 compared to 76% in the rest of Scotland. Unemployment rates are significantly lower in rural areas (3.1% compared to 6% in rest of Scotland in 2005) (baseline lead objective indicator 3) and rates of self-employment are higher (16% in rural areas compared to 8% in rest of Scotland) (2006 figures). Self-employment rates are particularly high in remote rural areas (22% in 2005). The number of self employed persons in rural areas is 84,000 (baseline lead objective indicator 30).

Employment rates for older people are higher in rural areas too. For those aged between 50 and state pensionable age (59 for females and 64 for males), the employment rate was 73% in rural Scotland in 2005 compared to 68% in the rest of Scotland. In rural Scotland in 2005, a higher employment rate was also evident for males (82%) compared to females (75%) and these rates are both higher than in the rest of Scotland. These figures reflect, in part, the lower male employment rates in urban areas.

The primary sector makes a relatively important contribution to rural employment, but is substantially outweighed by that of the secondary and tertiary sectors. Data for rural Scotland in 2004 show that primary activities accounted for 11% of employment, secondary activities for 30% and tertiary activities for 43%.

Although employment rates in rural areas are high, commuting out of rural areas for work is common, particularly in rural areas close to urban areas. Over 50% of people living in accessible rural areas commute outside their area of residence to get to work (2001 figures).

Land Use

Much of rural Scotland is characterised by mountainous terrain, poor soils and harsh climatic conditions. Agricultural land covers 6.12 million hectares or almost 80% of Scotland (2005 figures) but difficult physical and climatic conditions limit the uses to which much of this land can be put. Most agricultural land is rough grazing, and 85% is classified as Less Favoured Area (see Figure 3.2). The area of land used for crops, fallow and set-aside represents only about 10% of the total agricultural area. The livestock sector is of particular significance to Scottish agriculture, including a significant area of dairying in south-west Scotland. Appropriate and carefully managed livestock densities also play a critical role in the environmental integrity of upland areas. Figure 3.3 shows the different types of farming activities across rural Scotland.

Forming part of the north west fringe of the European Union, Scotland has a significant proportion of Less Favoured Area. The disadvantage experienced in Scotland is especially severe in a UK context; in addition to poor soils, a northerly location and often high altitude, there are problems of remoteness. Maintaining Scotland's Less Favoured Areas in active management plays an essential role in sustaining land-use systems that contribute to the survival of local communities and which are crucial to the delivery of environmental benefits, including the delivery of biodiversity targets and the maintenance of unique landscape character. In the Less Favoured Area, significant support is needed to sustain the land management businesses that deliver these benefits.

Scotland's average farm size is 101 hectares which is large compared to the rest of the UK and other parts of the European Union. However, this average disguises a wide range of holding size, from small crofts to large estates. A substantial proportion of holdings are small, particularly in the north and west where crofting is important (see below); 39% of holdings have less than 5 hectares of utilised agricultural area. Data on economic farm size underline this, with 63% of holdings having a farm size of less than 2 European Size Units 2. Very large holdings are rare, only 2% of holdings having a European size unit of over 100.

A particular feature of land-use in Scotland, and one of major cultural importance, is crofting. Crofting is a system of land tenure regulated through the Crofting Acts. There are approximately 770,000 hectares under crofting tenure, representing about 10% of the land area of Scotland. A crofter is normally the tenant of a croft, and pays rent to the landlord of the croft. A croft is a small agricultural holding situated in one of the seven former counties known as the "Crofting Counties": Argyll, Inverness-shire, Ross and Cromarty, Sutherland, Caithness, Orkney and Shetland. In 2005, there were around 17,785 crofts in Scotland with around 14,000 crofters. The croft usually provides grazing rights in an area of common grazing shared with a number of other crofts.

At the start of the 20th century, woodland cover in Scotland was just 5%, and less than a third of that was native woodland of semi-natural origin. Today, forests and woodlands cover 1.33 million hectares or 17.1% of Scotland, which is higher than in the UK as a whole (11.6%) but significantly less than the EU25 average (36.3%). A substantial proportion (35%) of forests and woodlands are under State ownership 3 and managed by the Forestry Commission. The remaining 65% is owned by private individuals, voluntary and charitable organisations, and other public sector organisations. The size of the Forestry Commission's estate has fallen since the 1980s, from 742,000 hectares in 1985 to 656,000 hectares in 2004.

Compared to the rest of the UK, Scotland's forests comprise a relatively large proportion of exotic conifers for commercial production, particularly on land under State control although broadleaved woodland on Forestry Commission land has risen notably since the 1980s (from 4,000 hectares in 1985 to 25,000 hectares in 2004). The types of woodland cover across Scotland are shown in Figure 3.4.

Figure 3.2 Less Favoured Areas in Scotland

Figure 3.2 Less Favoured Areas in Scotland

Figure 3.3 Farming activities in Rural Scotland

Figure 3.3 Farming activities in Rural Scotland

Figure 3.4 Woodland cover in Scotland

Figure 3.4 Woodland cover in Scotland

3.1.1.2 Strengths and weaknesses of the socio-economic context of rural Scotland

Based on the evidence provided above, Table 3.1 below summarises the strengths and weaknesses of the socio-economic situation in rural Scotland and notes the implications for the Scotland Rural Development Programme.

Table 3.1 Socio-economic context of rural Scotland: Main strengths and weaknesses

Main Strengths

Main Weaknesses

Demographics

  • Population in rural areas as a whole is increasing.
  • Net-migration into rural areas is increasing.

Implies that the programme can build on the fact that many rural areas are attractive places to live.

Demographics

  • Younger people are leaving rural areas.
  • Some rural areas experience depopulation.
  • Remote rural areas have an ageing population.
  • Accessible rural areas experience highest net migration rates.

Implies that the programme needs to consider out-migration of youths, ageing population and pressure from growth of accessible rural areas.

Economic drivers

  • Relatively stable economic growth in rural areas.

Implies that the programme needs to build on stable economies of many rural areas.

Economic drivers

  • Variation in economic growth with some rural areas lagging behind.
  • Rural contribution to total economic growth in Scotland is low.

Implies that the programme needs to consider rural/regional variation in economic performance and growing the economy in rural areas.

Labour Market

  • Labour market participation rates are high.
  • Unemployment rates are low.
  • Self employment rates are high.
  • Diversification of employment away from primary industries.
  • Labour market participation aged over 50 is higher than the rest of Scotland.

Implies that the programme can build on opportunities through self-employment and beyond primary industries that already exist.

Labour Market

  • Pockets of unemployment exist.
  • High rates of commuting out of rural areas.
  • Employment rate is higher for men than women.
  • Although labour market participation is high and unemployment low, this may be a sign of low skilled jobs.

Implies that the programme needs to consider rural/regional variation in employment opportunities for promoting skills.

Land use

  • Small farm holdings dominate
  • Crofting is a particular feature of land use in rural Scotland.
  • Woodland area has increased in recent years.
  • State ownership of forestry has fallen.

Implies that the programme will need to address the fact that the average size of farm holdings is small. Crofting also needs to be recognised.

Land Use

  • Rough grazing is the predominant use of agricultural land.
  • A high proportion of the land is in less favoured areas which is less productive.
  • Limited opportunities in many areas for diversification due to harsh climate, difficult physical conditions and remoteness.

Implies that the programme will need to recognise rough grazing and LFA as predominant land uses.

3.1.2 Performance of the agricultural, forestry and food sectors

3.1.2.1 Current situation

Competitiveness, structure and human capital in agriculture

After a period of growth between 1998 and 2003, total income from farming in Scotland declined in 2004 and 2005 by 11% (in real terms) to €637m. This mirrors the trend in the rest of the UK. Average farm incomes in Scotland have also declined in recent years, to just over €18,980 4 in 2004/05. Farming has received substantial financial support through the Common Agriculture Policy, especially under Pillar 1 for which total expenditure in 2004 was €583 million on approximately 20,000 farm businesses (a farm business may comprise more than one holding).

A fully decoupled Single Farm Payment Scheme ( SFP) was introduced in 2005, in line with the main aims of the 2003 reforms to improve the competitiveness and sustainability of agriculture and to promote food quality and environmental standards. Scottish SFPs are based on historic subsidy receipts during the reference period (calendar years 2000 - 2002). In 2006, SFPs amounting to approximately €622m were made to 20,330 farmers and crofters in Scotland. In addition, the national envelope option (Article 69 of Regulation 1782/2003) was used to develop the Scottish Beef Calf Scheme ( SBCS) amounting to payments of approximately €29m per annum to 8,195 Scottish farmers. Payment rates in 2006 were €117.12 for each of the first 10 calves raised and €58.60 for each subsequent calf. The SBCS provides an incentive for beef producers to maintain their production of beef bred calves from suckler cows and it helps to retain beef production in remote and fragile areas in particular, thereby protecting the environment in such areas.

The effectiveness of the 2003 CAP measures is being assessed through the Commission's CAP Health Check but it is too soon to know what further changes in the support regime may be introduced during the next few years.

There is a substantial variation in performance between the best and worst performing farms in Scotland with the bottom quartile demonstrating poor efficiency in terms of input use and costs. For example, average net farm incomes were €93,922 in 2004/05 for the top 25% of dairy farms but were negative for the bottom 25% of dairy farms (average loss in net farm income - €7,909).

Despite its environmental and social importance, Scottish agriculture accounts for a relatively small proportion of economic activity in Scotland. In 2004, it generated 1.2% of Scottish GVA although its importance is much greater in some regions of rural Scotland. There are around 51,000 farm holdings across Scotland but there has been considerable consolidation in the agriculture industry in recent years. The estimated number of farm businesses in Scotland has fallen by 10% since 1998.

In terms of human capital, Scottish agriculture employs around 45,000 full-time equivalents. This represents 2.2% of the total workforce in Scotland, or 5% of the rural workforce. Since 1998, the number of full-time employees has fallen significantly and employment of part-time and casual/seasonal employees has increased. The workforce is ageing, with 51% of working occupiers aged over 55 years (of which 24% are over 65 years) in 2005. With regard to training and education, the percentage of farmers with attainment in basic and full education in agriculture was 26% in 2005 (baseline lead objective indicator 4). Basic training refers to any training course in agriculture. Labour productivity in Scottish agriculture has increased in recent years to €64,372 per agricultural work unit in 2006 (baseline lead objective indicator 6). Significant opportunities exist to build on existing skills in the sector, and to encourage new entrants and entrepreneurial expertise into farming.

Diversification of activity provides a means of generating income to supplement that from farming. Such activity typically includes the use of farm buildings, machinery and labour for non-farm purposes. However, levels of on-farm diversification are relatively low in Scotland. In 2005, 22% of farmers engaged in some form of on-farm diversification activity. Of these, tourism accommodation and leisure, equine activities and shooting were the most common activities (6% each), and renewable energy was the least common activity (1%). Diversification has been a more prevalent adjustment strategy among smaller farms.

Collaboration has been recognised increasingly as a means of improving competitiveness in the farming sector, and is advocated as an important objective in A Forward Strategy for Scottish Agriculture: Next Steps. Further effort is needed to increase rates of collaboration, both between producers and among producers and processors in the food chain.

Further opportunities exist to enhance innovation in the agriculture sector, including through restructuring of farm activities, the development and processing of novel products, and through diversification. A key asset in achieving such opportunities is Scotland's reputation for high-quality produce, underpinned by its outstanding natural heritage and the 'sense of place' that can be attached to agricultural products.

Competitiveness, structure and human capital in forestry

Scottish forestry makes a slightly smaller contribution to the economy than agriculture. Wood production, wood processing and manufacturing of paper products contributed 1% to GVA in 2003. Despite significant increases in production by volume, the economic contribution of forestry planting and harvesting has declined in recent years, reflecting the impact of low prices for raw materials, although the processing sector has been more buoyant. Wood production in Scotland increased by 33% from 5.2 million m 3 in 2000 to 6.9 million m 3 in 2004. Investment in processing capacity was €88 million in 2005, around the same level as in 2000. Scottish wood's share of the UK market (by value) is 4.1%, a slight increase of 0.1% from 2000, reflecting an increase in Scottish timber production. In 2003, the number of businesses in the primary part of the forestry sector (forestry, logging and related services) was 837, a slight decline since 2000.

There were 19,000 employees in the forestry sector in Scotland in 2003. This figure includes employment associated with forestry, logging and related services, as well as the manufacturing of wood, wood products and the manufacturing of pulp/paper products. It does not include employment associated with forest recreation and tourism although recent research (Hislop et al. 2006 5) indicates that forests and woodlands have important employment effects through these activities. Labour productivity in forestry (forestry, logging and related services) was €46,000 per employee in 2006 (baseline lead objective indicator 14). The Scottish Forestry Strategy 2006 underlines the importance of improving the skills base in the forestry sector, and the critical role that workforce development plays in enhancing business competitiveness and productivity.

There is a substantial proportion of small-scale grower and processor businesses in forestry in Scotland, although in terms of processing volumes, the sector is characterised mainly by large-scale operators. Timber production stands at approximately 7 million m 3 per year. Many woodland owners struggle to obtain sufficient direct returns from their woodlands. This is affecting their ability to undertake desirable silvicultural operations, such as thinning.

Forestry is increasingly recognised as a tool for regeneration in areas of industrial decline, which exist in accessible rural areas of the central lowlands of Scotland. A recent analysis of forestry policy for Defra concluded that 'enhancing the environment and thereby improving quality of life factors may increasingly provide the cutting edge to enhanced competitiveness' and the analysis put a public benefit of up to €3.6 million/ha on woodlands in and around urban areas.

The Scottish Forestry Strategy 2006 emphasises the need to enhance business development in the forestry sector. Limited information exists on levels of diversification in forestry but there are opportunities for forestry businesses to diversify into value-adding activities such as local timber processing. Such opportunities also apply to farming businesses, although current levels of on-farm diversification into wood processing are low, with 3% of holdings undertaking wood processing in 2005. Woodlands also form an important backdrop to the tourism industry and there is significant potential for more businesses to benefit from the links between forestry and tourism.

Competitiveness, structure and human capital in food

Food manufacturing in Scotland generates slightly higher levels of GVA than agriculture (1.6% of the Scottish total in 2002). Beyond food manufacturing, the food service sector in Scotland is increasing in size and importance. Food service refers to hotels, restaurants, bars and canteens. In 2003, GVA in food service was €3.2bn, double that of food manufacturing.

Employment in food manufacturing (excluding fish processing) was 28,700 in 2003, representing just 1.2% of the total workforce. Labour productivity in Scottish food manufacturing (as measured by GVA per employee) has increased in recent years to €95,965 (baseline lead objective indicator 10) in 2006. About a third of employees are in rural areas, representing 1.5% of the rural workforce in Scotland. Employment has been falling in recent years, consistent with the general trend in manufacturing in the UK. The food service sector employed 161,000 in 2003.

The food manufacturing sector (excluding fish processing) comprised around 850 businesses in 2003, having declined from just over 1,000 businesses in 1998. Approximately, 15% of these businesses are engaged in meat processing. The food service sector is again much larger than the food manufacturing sector, supporting around 14,000 businesses in 2003.

The level of job vacancies is one indicator of how well the labour market is performing. The average vacancy rate in Scottish food and drink manufacturing was 4% in 2004, similar to other sectors in the Scottish economy. Compared with the rest of the economy, the food and drink sector is characterised by a similar proportion of vacancies that are the result of skill shortages (52%) and a smaller proportion of vacancies that are hard-to-fill (30% as opposed to 46% in other sectors). Migrant labour is increasing in this sector and may explain lower rates of hard-to-fill vacancies. Labour turnover in the food and drink sector is slightly higher than turnover in other sectors (27% compared with 23%).

Scottish food manufacturing is strongly linked with Scottish agriculture, sourcing 36% of all its inputs from Scottish agriculture in 2002. However, levels of on-farm diversification into processing of farm products are low. Approximately 3% of holdings undertook food processing activities in 2005, and further scope exists to build capacity in this area. Increased integration among producers and processors in the food supply chain is needed to improve the viability of the agriculture and food sectors and increase their economic contribution to rural Scotland.

3.1.2.2 Strengths and weaknesses of the performance of the agricultural, forestry and food sectors

Based on the evidence provided above, table 3.2 below summarises the strengths and weaknesses of the performance of the agricultural, forestry and food sectors and notes the implications for the Scotland Rural Development Programme.

Table 3.2: Performance of the agricultural, forestry and food sectors: Main strengths and weaknesses

Main Strengths

Main Weaknesses

Agriculture

  • Although agriculture contributes a small amount to overall GVA, it maintains an important economic contribution in some regions.
  • Agricultural productivity is rising.
  • On-farm diversification into tourism accommodation is the main form of diversification.

Implies that the programme needs to consider rural/regional variation in performance of agriculture and encourage further diversification into tourism.

Agriculture

  • Average farming incomes are declining.
  • The worst performing farms are particularly fragile.
  • Agricultural employment is declining.
  • Low rates of on-farm diversification activity. Diversification into renewable energy particularly low.
  • Training and education rates are low.
  • Levels of collaboration are low.

Implies that the programme needs to consider measures to improve the viability and competitiveness of some farms, as well as encouraging diversification and innovation, and the development of human capital including collaboration to share resources and add value.

Forestry

  • Local timber processing and links between forestry and tourism offer potential for diversification.
  • Forest recreation and tourism provide particular employment opportunities.
  • Forestry has an important role to play in renewable energy production.

Implies that the programme should build on the fact that benefits from forestry arise beyond timber production and have a clear recognition of forestry's role in economic development and climate change mitigation.

Forestry

  • The economic contribution of forestry has been restricted by low timber prices, although these are now rising.
  • Rates of on-farm diversification activity into wood processing are low.
  • Woodland owners struggle to obtain sufficient direct returns from their woodlands.
  • A lack of integration of farming and forestry cultures reduces uptake of opportunities for woodland creation and active management of farm woodlands.

Implies that the programme needs to consider encouraging further diversification into wood processing, and uptake of woodland creation and management opportunities.

Food

  • Labour productivity is increasing.
  • Scottish food manufacturing is strongly linked with Scottish agriculture.
  • The food service sector is increasing in importance.
  • GVA in food manufacturing is increasing.

Implies that the programme should continue to promote the links between Scottish agriculture and food manufacturing and continue to encourage value added activities.

Food

  • Food manufacturing continues to decline and the food processing base is weak.
  • Rates of on-farm diversification activity into processing of farm products are low.
  • There are insufficient levels of food chain collaboration between processors and producers.

Implies that the programme needs to address the food processing base and encourage diversification into on-farm processing of farm products and collaboration and integration in the supply chain.

3.1.3 Environment and land management

3.1.3.1 Current situation

Biodiversity and landscape

A combination of arctic, alpine and Atlantic influences, a varied geology, offshore islands and an indented coastline contribute to a unique range of landscapes, wildlife habitats, flora and fauna in Scotland. There are an estimated 50,000 land species including 42 mammals and 242 birds, which is half of the species of birds regularly occurring in Europe. Outstanding features of Scotland's biodiversity include extensive peatlands, particularly the area dominated by heather, breeding populations of seabirds, geese and wading birds, lichens and lower plants (particularly mosses and liverworts), a large (and expanding) population of otters, and wet oakwoods on the west coast. Much of Scotland's biodiversity has developed in close association with long-established patterns of land-use. In particular, non-intensive livestock farming plays an important part in maintaining wildlife habitats and the character of the Scottish landscape. The high quality and range of Scotland's biodiversity lends an important role to high nature value farming in remote areas and to sustainable forest management.

Farming in Scotland is subject to a wide range of regulations covering issues such as environmental protection and health and safety. All farm businesses have to comply with applicable community standards, including Cross Compliance (encompassing the requirements of Good Agricultural and Environmental Condition and the Statutory Management Requirements). Over and above the Community standards there are many quality assurance schemes and initiatives in place in Scotland that recognise higher management standards. A high proportion of producers participate in such schemes both for crop and livestock production and for specialist production such as organic farming.

Natura network

A range of international, national and local designations protect Scotland's biodiversity. As elsewhere in the UK, Special Areas of Conservation ( SACs) and Special Protection Areas ( SPAs), which form the Natura 2000 network, are almost all designated as Sites of Special Scientific Interest ( SSSIs). SSSIs also protect many of the plants, animals and habitats that are priorities in the Scottish Biodiversity Strategy. The land cover of Scotland is as follows: 69,100 ha is woodland; 751,700 ha is farmland; 21,900 ha is developed; and 308,200 ha is other (Land categorised as 'other' comprises montane habitats, inland water bodies, wetlands and coastal habitats.) a total of 1.15m hectares (baseline lead objective indicator 18) .

The terrestrial Natura network in Scotland comprises 215 SACs (8 of which include a marine component) and 142 SPAs which extend to 605,000ha above Mean High Water Springs ( MHWS) and 591,000ha above MHWS respectively. Some sites are both SAC and SPA so the extent of terrestrial Natura sites is 855,000ha which represents approximately 11% of the land surface of Scotland.

Apart from a small number of habitats such as scree, rocky slopes, coastal cliff and ravine, the majority of protected habitats are subject to some form of land use and management. All sites have conservation objectives and are managed specifically to benefit the qualifying interests under management plans. Plans have been completed for 87% of the Natura series and the remaining sites are managed to benefit the qualifying interest through inclusion in statutory land use plans such as Local Authority structure and local plans.

At present some 75% of the terrestrial area of SPAs (444,000ha) is under assured management through a variety of mechanisms including contractual arrangements under Scottish Natural Heritage Natural Care and Scottish Executive agri-environment schemes, and tenure by conservation and public bodies. 65% of the terrestrial area of SACs (393,000ha) is under assured management arrangements. Site condition is monitored on an agreed cycle, with a view to assessing site condition and the efficacy of the management.

There are 23 marine Natura sites which do not form part of the analysis above.

The Natura network is well distributed throughout Scotland and the type and size of site varies according to locality. In the Highlands and Islands ( NUTSUK M4) sites are largest with extensive uplands, peatlands, heaths, lochs and rivers and woodland remnants as well as important coastal systems, including the unique machair habitat as well as extensive cliffs, islands and skerries. These areas are strongholds of a variety of breeding and wintering birds.

The North-east of Scotland ( NUTSUK M1) includes a substantial area of the Cairngorms uplands and is characterised by outstanding areas of Caledonian forest, heaths and coastal cliffs and bays as well as some of the outstanding SAC salmon rivers, and a number of raised bogs.

East Scotland ( NUTSUK M2) has many similarities to the North-east having a substantial number of raised bogs and lowland woods and is focussed on the outstanding estuaries of the Forth and Tay. This area is a stronghold for wintering waterfowl. The area also holds the Tay and Tweed river systems, two of the outstanding Atlantic SACs in Europe.

South West Scotland ( NUTSUK M3) is characterised by the outstanding estuary, bay and cliff areas of the Solway with a hinterland rich in heathland and raised bog sites, along with important heath ravine woodland and upland areas. This region is important for a number of species scarce in Scotland such as great crested newt and natterjack toad.

One hundred and ninety one Natura sites (59% of terrestrial sites by number), have agriculture as a significant activity affecting the interest, in some cases essential for achieving appropriate status of qualifying features. These sites cover an area of 878,272 ha, 74% of the area of terrestrial sites. 75 sites have forestry/woodland management of features, covering 39,851ha, though this extent will increase as new areas of woodland are created.

Natura sites may be adversely affected by a range of occurrences and activities. For non-marine Natura sites these include:

  • Habitat fragmentation and isolation
  • Burning
  • Undergrazing/lack of management
  • Stock induced overgrazing and erosion
  • Inappropriate agricultural operations (drainage, herbicides, re-seeding)
  • Earlier cutting of grass
  • Social changes in crofting
  • Lack of tree and shrub regeneration
  • Inappropriate forestry operations
  • Game or fisheries management
  • Water quality (direct or diffuse inputs)
  • Water abstraction
  • Invasive species
  • Dumping / spreading / storage of materials
  • Sand and shingle extraction

Activity to protect and enhance Natura sites will be funded through the competitive Rural Development Contracts - Rural Priorities mechanism (see Chapter 5). A wide range of options that will deliver on our Natura objectives will be available to land managers under Rural Priorities. To assist land managers in selecting actions that are most appropriate to their circumstances (environment, landscape, flora and fauna, etc) the Scottish Executive has pulled together "packages" of options derived from measures and sub-measures in the Programme. A number of these are specifically designed to help protect and enhance Natura habitats and species. Further information about these packages is provided in the Appendix to Chapter 5.

Although Rural Priorities is competitive, Natura sites are both a national and a regional priority for funding. During the assessment of proposals for funding through Rural Priorities, a key criterion will be the contribution that an application can make to meeting national targets on Natura sites. The combination of relevant options together with Natura prioritisation at regional level and during the application assessment process will ensure that measures we propose to fund will deliver on Natura objectives.

Significant resources have been provided to support the Natura 2000 network and SSSIs through the Natural Care programme administered by Scottish Natural Heritage and through agri-environment and forestry schemes administered by the Scottish Executive and the Forestry Commission. Approximately 70% of SSSIs are subject to management agreements with Scottish Natural Heritage through Natural Care which, in the 2000-06 programming period, operated as a State Aid. Natural Care also supports the management of the few Natura features (such as geese, rivers and some areas of peatland) that are not covered by SSSIs. Support from agri-environment and forestry schemes has been provided primarily through the Rural Stewardship Scheme and the Scottish Forestry Grants Scheme. Along with Natural Care, these schemes will be incorporated in the 2007-13 SRDP. Support for Natura sites and SSSIs will, therefore, form an important part of the 2007-13 SRDP. Scottish Ministers have set a target of bringing 95% of SSSIs into 'favourable condition' by 2010, in support of the objectives of the 6 thEU Environmental Action Programme ('to protect and restore the functioning of natural systems and to halt the loss biodiversity in the European Union').

Biodiversity

Other important designations relating to biodiversity include 51 RAMSAR sites (established under the 1971 Convention on Wetlands signed in Ramsar, Iran) covering 313,670 hectares and 63 National Nature reserves covering 111,000 hectares. There are also two National Parks in Scotland, at Loch Lomond and the Trossachs and in the Cairngorm mountains. Set up since 2003 they provide major opportunities to achieve an integrated approach to land management, the natural and historic environment, and business and community development.

The Scottish Biodiversity Strategy, published in 2004, embodies the commitment of Scottish Ministers to achieving biodiversity targets. Its Action Plan includes 226 priority species and 41 priority habitats identified at UK level (through the UK Biodiversity Action Plan). There are also 32 Local Biodiversity Action Plans which aim to ensure effective delivery on the ground of the UK targets as well as raising awareness of local biodiversity.

Bird populations are well studied and are an important indicator of the changing biodiversity of Scotland's habitats. The number of waterbirds rose between the mid-1980s and mid 1990s and numbers have stayed relatively stable subsequently. Seabird numbers fell by one third between 1991 and 2004. While the number of terrestrial breeding birds has risen since 1994, this follows declines, particularly in farmland birds, in earlier years. (See Figure 3.5). If re-indexed with 2000 as the base year (=100) the index value for all farmland birds 2006 is 99 (baseline lead objective indicator 17).

Figure 3.5 Bird populations in Scotland, 1975-2004

Figure 3.5 Bird populations in Scotland, 1975-2004

Landscapes

Scotland's landscapes are a major asset, contributing to its national and regional identities, adding to the quality of many people's lives and providing attractive settings which help to promote cultural, environmental, social and economic development. Its coasts, mountains and moorlands are particularly renowned.

The main national landscape designation in Scotland is National Scenic Areas ( NSAs). These are areas of land of national significance which, due to their outstanding scenic interest, require conservation as part of the country's natural heritage. They have been selected for their characteristic features of scenery comprising a mixture of richly diverse landscapes including prominent landforms, coastline, sea and freshwater lochs, rivers, woodlands and moorlands. There are currently 40 NSAs in Scotland, covering a total area of 1,001,800 ha.

Areas of Great Landscape Value ( AGLVs) may be designated by planning authorities for the purpose of safeguarding regionally or locally important areas of outstanding scenic character or quality from inappropriate development. In addition, some authorities have also identified areas of regional scenic significance. Scottish Development Department ( SDD) Circular 2/1962 provides advice on the definition of AGLVs in development plans and the framing of policies for the control of development within them. These local designations complement NSAs and play an important role at the local level in developing understanding and awareness of the landscape features and qualities that make particular areas distinctive and that give communities a sense of place.

A landscape character assessment of Scotland identified changes in farmland; woodland; mountain and moorland; freshwater; and the coast line areas within Rural Scotland. Some of the key changes recorded during the assessment were attributed to changes in farming practice (such as conversion of grass land to arable land, and the loss of field boundaries), large scale coniferous afforestation, and loss of vegetation due to recreation in upland areas.

The UK has signed and ratified the European Landscape Convention, and a number of the options within this programme will support the Convention's measures including landscape protection and management and increased public awareness of landscape value. There are 40 National Scenic Areas in Scotland, including such iconic places as Ben Nevis and Glencoe, St Kilda, the Eildon Hills, the mountains of Arran and the Falls of Clyde and New Lanark. Scotland also has 346 landscape areas registered on the Inventory of Gardens and Designed Landscapes, approximately 7,800 Ancient Monuments scheduled as being of national importance, and over 47,000 listed buildings.

Wild Deer

Wild deer are an important part of Scotland's wildlife. Their grazing and trampling helps to maintain the balance of many natural habitats. Deer management provides employment, while marketing venison generates further economic activity. However, deer can also cause damage to woodland, agriculture and the natural heritage.

The Deer Commission for Scotland has certain powers under the Deer (Scotland) Act 1996 to prevent damage caused by deer. However, these powers can only be used to stop further deterioration and not to improve the economic value of woodland or the condition of the natural heritage.

Programme measures 216 and 227 offer support for deer management aimed at improving the condition of native woodland and natural heritage features on SSSIs and Natura sites. These are essential to meeting the Scottish Executive's target for bringing SSSIs into 'favourable condition'. Deer impacts contribute to 'unfavourable' assessments in some 32% of cases.

Payments for deer management under different measures cannot be made over the same area of land. Also, to receive payments over both woodland and open range habitats, beneficiaries would need to provide a break-down of the anticipated costs and demonstrate that there is no double funding.

Organic Action Plan

The Organic Action Plan commits the Scottish Executive to create conditions to help the organic sector develop. The Action Plan objectives are that:

  • Scottish organic products grow in market penetration so that they can meet at least 70% by value of overall Scottish consumer demand for organic products that can be sourced in Scotland as well as succeeding in the broader UK and international markets.
  • There is a doubling of the area of arable land and improved grassland in organic conversion or production.

Water

Scotland has a highly indented coastline with many sea lochs, particularly in the north and west. Just over 2% of Scotland's land area is covered by inland water, including large lochs and many smaller lochans in the Highlands. Rivers are generally relatively short and fast flowing. The Tay is the longest river in Scotland, stretching a distance of 120 miles. Water is a major asset for land-use and other economic activities, including recreation and tourism.

Seasonal flooding presents difficulties in some areas, particularly in some eastern areas where rivers flow through flatter terrain. The Scottish Executive provides support for Local Authority proposals for projects to address flooding and coastal defence. Under the Flood Prevention Scotland Act (1961), 72 flood and coastal defence schemes have been approved. Forty-two flood warning schemes are in place. The latest available information suggests that 78,000 properties (3%) are at risk from a 1-in-200 year event. Climate change forecasts predict further and more severe flooding events in the future.

The quality of Scotland's water environment is generally good. The Scottish Environment Protection Agency ( SEPA) estimates that 78% of Scotland's freshwater surface waters (rivers and lochs) were of good or excellent quality in 2005. The river length which is classified as poor or seriously polluted has fallen from 927km in 2000 to 780 km (3% of the total) in 2005. Ninety-eight per cent of estuaries and 99% of coastal waters were of good or excellent quality, following improvements since 2000 (source: SEPA, State of Scotland's Environment 2006: http://www.sepa.org.uk/publications/state_of/2006/main). However, SEPA has estimated that some 30% of Scottish river water bodies are at risk of not meeting Water Framework Directive water quality objectives principally due to diffuse pollution from agriculture or forestry.

SEPA published in September 2007 its overview of the Significant Water Management Issues ( SWMI) of the Scotland River Basin District. According to this report, some 29 (15% of the total area) of the groundwater bodies are at risk of not meeting Water Framework Directive objectives due to point source pollution, and a further 129 (25 % of the total area) due to diffuse pollution. The statistics for diffuse pollution are similar for Scottish groundwater bodies in the Solway and Tweed catchments, whilst those for point sources are lower. In addition to the current Nitrates Action Programme (under revision), diffuse pollution is addressed through Cross-Compliance measures and Farm Assurance and Rural Stewardship schemes. The SWMI Report is available on the SEPA web-site ( www.sepa.org.uk).

SEPA also carried out a detailed assessment of eutrophication for the Urban Waster Water Treatment Directive ( UWWTD) sensitive areas review in 2005, reported as Eutrophication Assessment of Scottish Coastal, Estuarine and Inland Waters. The criteria used followed those of the UK guidance. For rivers, assessments were based on a combination of nutrient ( SRP) criteria, filamentous algal cover and values of the Trophic Diatom Index; for lochs it was mainly nutrients ( TP) and chlorophyll, with macrophyte data provided by Scottish Natural Heritage ( SNH) where available.

Under UWWTD there are two categories ('eutrophic' and 'may become eutrophic') and these accounted for 2,180 kilometres (8.6%) of Scotland's river network. 17 lochs (9% of the total) were found to be eutrophic or liable to become eutrophic. For rivers, the main sources of nutrients were found to be diffuse - agriculture and point - sewage. Other sources (e.g. fish farming, forestry, urban run-off) account for a much smaller proportion. This is reflected in the regional breakdown. SEPA analyses data by three regions: North, South-East and South-West. The waters affected by eutrophication are mainly in the South-East and South-West, in areas of high population density and intensive agriculture.

Nitrates Directive

The current Scotland baseline for nitrates complies with Regulation 73/2009 and is contained in SMR4. It is recognised, however, that the Commission did not consider the Scottish Action Programme that was made in 2003 to be in conformity with the requirements of the Nitrates Directive. Following a public consultation exercise and extensive bilateral discussion with the Commission, the Scottish Executive drew up a revised Nitrates Action Programme, designed to achieve compliance with the Directive. The revised Action Programme was established by Regulations made in September 2008, and came into effect on 1 January 2009. From that point the Programme forms the new requirement in cross compliance - SMR4. The requirements of the revised Nitrates Action Programme will be applied as an entry condition for agri-environment measures implemented in the NVZs and will be given legal effect through Rural Development Contracts entered into under the SRDP. Agri-environment payment rates in the SRDP - to be applied throughout Scotland - are based on the requirements of the revised Nitrates Action Programme. This means that payments will only be made for management which goes beyond the revised Nitrates Action Programme requirements in full accordance with the provisions of Article 39(3) of Council Regulation 1968/2005.

Inorganic and Organic Fertilisers

As an entry requirement, Rural Development Contracts for agri-environment measures in the NVZs are required to comply fully with the provisions of the revised Nitrates Action Programme, which limit the use of organic manures and inorganic fertilisers, and the Code of Good Agricultural Practice for the Prevention of Pollution From Agricultural Activity which applies both in and outside the zones. No payment is made for meeting these standards.

The use of inorganic and organic fertilisers on land under agri-environment measures is very limited. Where appropriate, details of the maximum level of applications permitted are set out in the prescriptions for each option. These are based on the SAC Fertiliser Recommendations for agricultural and horticultural crops that provide recommendations for the use of lime and major nutrients (N, P, K, S, Mg and Na) on most field grown crops including arable grassland, field vegetables and fruit. Agreement holders are required to keep records of the applications on a field by field basis.

Although phosphorus is not specifically addressed under the Nitrates Action Programme, it is expected to have a positive impact on phosphorus pollution. There are no other specific requirements concerning phosphorus pollution in addition to those outlined above.

The Scottish Executive issued a consultation paper with draft regulations to apply across Scotland to improve the control of diffuse pollution from rural land use through General Binding Rules. These rules are, in many cases, based on guidance in codes of good practice, governing such matters as the storage and application of fertilisers (including manures), the keeping of livestock, the cultivation of land, the handling or use of pesticides, and the construction or maintenance of waterbound roads and tracks. The Diffuse Pollution Regulations came into force on 1 April 2008 and, like the Nitrates Action Programme, these rules are planned as a means of improving the protection of the water environment.

Ammonia

Reduction in ammonia emissions is via obligations arising from the National Emissions Ceilings Directive and Gothenburg Protocol which sets an 11% reduction target for ammonia emissions in the UK by 2010. Defra have a revised code of agricultural good practice currently out for consultation which has measures to reduce ammonia emissions. In Scotland we have the Prevention of Environmental Pollution From Agricultural Activity ( PEPFAA) Code which provides similar guidelines to reduce pollution from agricultural practices. Defra are funding a project this year ( UK-wide) to look at ammonia emissions with a view to drafting an ammonia strategy (with the devolved administration) in the near future.

Fertiliser and Plant Protection Products

The minimum requirements for fertiliser and plant protection products used and other mandatory requirements; minimum requirements for fertilisers must include, inter alia, compliance with the PEPFAA Code; minimum requirements for plant protection products must include, inter alia, compliance with the statutory Code of Practice for Using Plant Protection Products in Scotland, including requirements to use only approved products, to meet training obligations, requirements on safe storage, the checking of application machinery and rules on pesticide use close to water and other sensitive sites as established by national legislation.

All payments under this measure are for commitments which exceed the statutory minimum requirements set out in national legislation for fertiliser and plant protection products used, including requirements introduced under the Nitrates Directive Action Programme. All commitments also exceed the requirements set out in the PEPFAA Code.

Integrated Pollution Prevention and Control

The Scottish Environment Protection Agency ( SEPA) is the main regulatory and enforcement body for pollution control and environmental protection in Scotland. SEPA's objective is to provide an efficient and integrated environmental protection system for Scotland that will both improve the environment and contribute to the Scottish Executive's goal of sustainable development. A major potential source of pollution is emissions from industrial installations. The Scottish Executive has, therefore, required SEPA to regulate those industrial processes with a significant pollution potential so as to prevent, minimise or render harmless discharges to air, land and water which may be harmful to the environment or human health. This is consistent with the aims and objectives of the Integrated Pollution Prevention and Control ( IPPC) Directive.

IPPC introduced stringent new pollution prevention measures designed to eliminate or minimise emissions to all media from major industrial processes, and introduced regulatory controls to previously unregulated sectors. IPPC also extends pollution controls to energy efficiency, consumption of raw materials, noise, prevention of accidents, waste minimisation and recovery, and the restoration of sites after use. The Pollution Prevention and Control (Scotland) Regulations 2000 ( PPC), which transposed IPPC in Scotland, require industrial installations to transfer to the new regime on a phased timetable between 2001 and 2007. The regulations are enforced by SEPA. About 450 industrial sites in Scotland are subject to IPPC controls and at least 98% of these will have transferred to the new regime by the October 2007 deadline required by the Directive.

Climate change

Emissions of greenhouse gases ( GHGs) including carbon dioxide, methane and nitrous oxide are contributing to changes in global climate. Activities in rural areas make a contribution to greenhouse gas emissions, but these will in turn be affected by changes in the climate as action is taken to adapt to changes in growing conditions. Land use changes are especially important in a Scottish context due to the large store of carbon in forests and soils (over half of UK soil carbon reserves are in Scotland) which can be enhanced through practices such as expansion of forest areas (although this is dependent on the original land use) and allowing agricultural land to revert to a more natural state, and appropriate management. Practices such as cultivating moorland can lead to a depletion of soil carbon.

The land use sector, particularly agriculture and forestry, acts as both a source of greenhouse gas emissions and as a carbon sink (by removing carbon from the atmosphere either through uptake of carbon by growing plants and trees or by storing carbon in soil organic matter). This sink function is very important in the Scottish context: removals of carbon by Scottish forests generated 62% of UK removals in 2003, and suitable management of agricultural soils helps to maintain organic matter and is a key theme in the proposed Scottish soils strategy.

In 2003, direct green house gas emissions from agriculture were 12% of total emissions in Scotland (excluding removals). For carbon removals, 16% of Scotland's emissions are removed (via the carbon sink) due to land use change and forestry. Land use change and forestry includes land converted to forestry, cropland and grassland. Overall, Scotland is a net sink (removals minus emissions) through land use change and forestry.

The main gases emitted by the agriculture sector are methane and nitrous oxide, with only a small amount of CO2 emissions from energy use. Agriculture is the largest source of methane emissions in Scotland (73% of all methane emissions). Agriculture is also responsible for most of Scotland's nitrous oxide emissions (83%) although between 1990 and 2003 these emissions have fallen by 17%.

Biobeds, which are to trap spillages of pesticides, will not affect emissions of Greenhouse Gases ( GHGs). There will be some emissions of GHGs from Constructed Farm Wetlands ( CFWs), but they are not expected to be any greater than if the material was conveyed to alternative storage. In Scotland CFWs will be used for lightly contaminated water, not pure slurry or other materials rich in nitrogen or carbon. CFWs are low-energy systems, which will make savings in machinery use and thus in the GHG emissions by eliminating the need to pump/transport and spread the material if a CFW were not used. Both biobeds and CFWs involve capital expenditure for the modernisation of the farm.

Bioenergy

The energy produced from biomass feedstocks is termed 'bioenergy'. Biomass energy development is part of a portfolio of renewable energy systems that could be exploited in Scotland - to reduce greenhouse gas emissions as well as to contribute to future energy security. The Biomass review study 6 in 2006 looked at the environmental and economic aspects of the growing and use of biomass in Scotland, both as a renewable energy source and as a transport fuel. Biomass has advantages compared to other renewable energy sources: it is a potential source of heat as well as electricity; it produces energy continuously without problems of intermittency; it provides a local raw material supply base; and, it is an effective stimulus to the rural economy due to relatively extensive supply chains. Drawbacks of biomass include the costs of producing certain feedstocks, the often dispersed nature of biomass resources (which can make supply chains more challenging to manage) and the low energy density of biomass feedstocks (relative to fossil fuels) which increases transportation and storage requirements.

There are three main types of biomass feedstock: (i) wood and woody residues from forestry and wood-processing industries (ii) agricultural residues and by-products and (iii) purpose-grown energy crops. Wood fuel output from Scotland's forests is the primary feedstock in Scotland. There is also a potentially significant resource that could be available from secondary processing industries (recycled wood) but estimates of the amount that would be available for biomass energy use need to be refined. Information on the availability of other feedstocks for bioenergy, such as straw and animal slurry, is less precise, although these are expected to play only minor roles in the development of bioenergy in Scotland. Short rotation coppice is believed to hold the most potential of other purpose-grown energy crops, but limited commercial experience in Scotland means that it is difficult to predict yields with accuracy and doubts remain about the its economic viability in Scotland. The area under energy and biomass crops in Scotland is 9,600 hectares ( baseline lead objective indicator 25).

Soil Quality

Soil is a non-renewable resource essential for supporting agriculture, forestry and ecosystems. SEPA have identified three main pressures affecting soils: industry, agriculture and forestry. With agriculture and forestry accounting for 80% and 17% respectively of the land area in Scotland, these sectors have an important role to play in promoting soil quality.

Impacts from agriculture include the use of inorganic fertiliser and pesticide application. Inappropriate or mistimed use of fertilisers may cause nutrient enrichment and eutrophication of waters. Since 2000, overall phosphate application rates have been relatively stable (42 kg per hectare in 2000 compared to 41 kg per hectare in 2004). Overall nitrogen application rates have declined from 118 kg per hectare in 2000 to 108 kg per hectare in 2004 reflecting a longer term reduction in application rates to grassland and a recent reduction for tillage crops.

Figures illustrating recent trends in pesticide usage in Scotland show that application has been relatively stable. In 2000 the total weight of pesticides used on cereals, oilseed rape, potatoes and set-aside was 1,363 tonnes. The comparable figures for 2002, 2004 and 2006 were 1,401 tonnes, 1,642 tonnes and 1,413 tonnes respectively. The total area sprayed has risen very slightly over that period, from 5,638k hectares in 2000 to 5,826k hectares in 2006. None of these pesticides figures includes sulphuric acid, which is used over a relatively small area but can distort overall trends.

Soil erosion is a natural process which occurs in all soils to a greater or lesser extent. The major processes considered are water erosion, mass movements and wind erosion, although tillage displacement is increasingly recognised as a significant contributor to soil erosion rates.

Published research on the State of Scottish Soils7 reviewed the evidence on the state of, and threats to Scottish soils. The study highlighted that soils are a valuable and often fragile natural resource, and that the range of environmental services they provide to society is often underestimated. The research found that Scottish soils are generally in good health, with the most important threat being soil organic matter loss and the impacts of a changing climate. The study also highlights a lack of reliable data that can provide information on trends in soil quality throughout Scotland. Development of a soil monitoring system in Scotland is now underway.

A further study 'Scotland's Soil Resource - 'Current State and Threats 2006'' provided further evidence and mentions a diffuse pollution screening tool developed by Anthony et al. (2006) covering a wide range of potential pollutants amongst which was suspended sediment. The screening tool incorporated a landscape connectivity index based on soil runoff characteristics, slope angle and shape and soil texture. The landscape connectivity model was then combined with a water balance model and a model of soil detachment and transport within the PSYCHIC modelling framework ( Defra Project PE0202). The map output is at a resolution of 1 km 2 grid cells and the amount of sediment includes point source contributions from sewage treatment works discharges and septic tanks (see Table 3.3 and Figure 3.6, below). It is important to note that the screening tool has been developed specifically as a tool for SEPA to tackle diffuse pollution. Thus the areas highlighted in Figure 3.6 are already receiving special attention, using voluntary codes of practice such as the PEPFAA Code and the Farm Soils Plan. There are also specific soil erosion measures as part of GAEC.

Table 3.3: Modelled total annual sediment losses (tonnes per year) to surface waters, by source.

Diffuse Sources

Point Source

Urban

Roads

Agriculture

Forestry

Septic Tanks

Sewage Discharges

46,820

29,598

773,845

13,449

7,513

7,198

These modelled predictions of soil erosion have not been verified against field data.

Figure 3.6 Spatial distribution of the total modelled annual sediment loss from point and diffuse sources to ground and surface waters in Scotland.

Figure 3.6 Spatial distribution of the total modelled annual sediment loss from point and diffuse sources to ground and surface waters in Scotland.

Overall erosion models provide a useful indication of the geographical variation in erosion susceptibility, highlighting areas potentially at risk and areas where the environmental function provided by soils where rainfall infiltrates may be inadequate to protect surface waters. They also provide a framework for evaluating the effects of changing rainfall or cropping on potential erosion rates. However, the predictions from soil erosion models are often insufficiently verified against field data. There is thus a clear need for targeted measurements of actual erosion rates for calibration of model predictions to increase confidence in the outcomes from soil erosion modelling. 8

Invasives

Japanese knotweed ( Fallopia japonica)

According to the New Atlas of the British and Irish Flora (C.D. Preston, D.A. Pearman & T.D. Dines, 2002), Japanese knotweed is present in 1877 10km 2 across Great Britain with a plus 1.83 change. A map showing distribution can be found at the National Biodiversity Network Gateway

http://www.searchnbn.net/gridMap/gridMap.jsp?allDs=1&srchSpKey=NHMSYS0000458716

Japanese Knotweed is widespread across south and central Scotland, west Scotland and up the east coast to Inverness.

Giant hogweed ( Heracleum mantegazzianum)

According to the New Atlas of the British and Irish Flora (C.D. Preston, D.A. Pearman & T.D. Dines, 2002), giant hogweed is present in 809 10km 2 across Great Britain, with a plus 2.09 change. A map showing distribution can be found at the National Biodiversity Network Gateway

http://www.searchnbn.net/gridMap/gridMap.jsp?allDs=1&srchSpKey=NBNSYS0000003711

Giant hogweed is widespread in central Scotland and up to east coast to Inverness.

Himalayan balsam ( Impatiens glandulifera)

According to the New Atlas of the British and Irish Flora (C.D. Preston, D.A. Pearman & T.D. Dines, 2002), Himalayan balsam is present in 1413 10km 2 across Great Britain , with a plus 1.85 change. A map showing distribution can be found at the National Biodiversity Network Gateway

http://www.searchnbn.net/gridMap/gridMap.jsp?allDs=1&srchSpKey=NBNSYS0000003189

Himalayan balsam is widespread in central Scotland and up to east coast to Inverness.

Rhododendron ponticum

According to the New Atlas of the British and Irish Flora (C.D. Preston, D.A. Pearman & T.D. Dines, 2002), Himalayan balsam is present in 1787 10km 2 across Great Britain , with a plus 1.83 change. A map showing distribution can be found at the National Biodiversity Network Gateway

http://www.searchnbn.net/gridMap/gridMap.jsp?allDs=1&srchSpKey=NBNSYS0000003888

Rhododendron ponticum is widespread in central and southern Scotland and up both the east and especially the west coast.

Grey squirrel ( Sciurus carolinensis)

A map showing distribution can be found at the National Biodiversity Network Gateway

http://www.searchnbn.net/gridMap/gridMap.jsp?allDs=1&srchSpKey=NHMSYS0000332764

The Grey squirrel population is widespread in south and central Scotland and up the east coast to Aberdeen

National Legislation

In addition to European environmental legislation, land management activities in Scotland are subject to the requirements of a wide range of domestic regulations. These are summarised below in Table 3.4

Table 3.4: National Regulations governing environmental and land management practices in Scotland

Legislation

Summary

Water Environment (Controlled Activities) (Scotland) Regulations 2005

Prohibits pollution of groundwater. Before certain listed substances including used sheep dips and waste pesticides are disposed of by land spreading, official authorisation must be obtained.

The Control of Pollution (Silage, Slurry and Agricultural Fuel Oil) (Scotland) Regulations 2003

Set minimum standards for the design, siting, construction, and repair of silage, slurry, and agricultural fuel oil storage facilities.

The Action Programme for Nitrate Vulnerable Zones (Scotland) Regulations 2003

Restricts the application of nitrates to farmland.

The Pollution Prevention and Control (Scotland) Regulations 2000

Requires that different classes of installations obtain a permit to operate and take steps to prevent pollution, or where that is not possible, to minimise it using "Best Available Techniques".

The Animal By-Products (Scotland) Regulations 2003 SSI No 411

They implement the EU Animal By-Products Regulation 1774/2002 which lays down health rules concerning animal by-products not intended for human consumption.

The Control of Pesticides Regulations 1986, as amended by the Control of Pesticides (Amendment) Regulations 1997

Controls the sale, supply, storage, use and advertisement of pesticides and makes it an offence to:

  • Pollute the environment and/or use a pesticide in such a way that would be likely to cause harm to humans and animals;
  • Not follow the instructions in the statutory box on the pesticide label;
  • Use pesticides approved for agricultural use without a certificate of competence.

Plant Protection Products (Scotland) Regulations 2005 (as amended)

The legislation controls the sale and supply of plant protection products, mainly agricultural pesticides. Under this legislation it is an offence to use or distribute a non-approved pesticide.

EC Fertilisers (Scotland) Regulations 2006

Sets out the national enforcement provisions as permitted by Regulation ( EC) 2003/2003.

Contaminated Land (Scotland) Regulations 2000.

Local authorities have a duty to identify and secure the remediation of 'contaminated land' in their area. ( SEPA have a role in dealing with 'special sites' and pollution of controlled waters.) The regime is aimed at helping to protect human health and the environment.

The Waste Management Licensing Regulations 1994, as amended.

Govern waste management licensing and conditions on licensed activities, and allows for the monitoring of sites to ensure compliance with license conditions.

The Sludge (Use in Agriculture) Regulations 1989, as amended.

These regulations implement Council Directive 86/278/ EEC on the protection of the environment, and in particular soil, when sewage sludge is used on agricultural land. They prohibit the use of sludge from sewage treatment works being spread on agricultural land unless specified requirements are fulfilled.

Water Environment and Water Services (Scotland) Act 2003

River basins must be clearly designated and monitored, with River Basin Management Plans drawn up tailored to the specific circumstances in that river basin.

Environmental Impact Assessment (Agriculture) (Scotland) Regulations 2006

Prohibits unauthorised alterations to the use or management of areas of uncultivated or semi-natural land for the purpose of agricultural intensification.

The Wildlife and Countryside Act 1981 (as amended)

Protects wild animals, birds, plants and their habitats.

The Nature Conservation (Scotland) Act 2004

Act legislates for notification of SSSI by Scottish Natural Heritage.

Vast majority of terrestrial Natura 2000 sites in Scotland are underpinned by SSSI designation (and justifiable where not the case)

Creates offences of damaging SSSIs for both owners/occupiers and members of the public who deliberately or recklessly damage or destroy such sites

Scottish Natural Heritage (or other regulatory authority) must give consent for operations which threaten SSSIs

The 2004 Act also provides for potential imposition of Land Management Orders where specified management work is required for SSSIs and Natura 2000 sites

Empowers Ministers to make Nature Conservation Orders to prohibit a specified operation on specified land to protect (inter alia) Natura 2000 sites

The Conservation (Natural Habitats, & c.) Regulations 1994 (as amended)

Makes it an offence to intentionally or recklessly damage a Natura 2000 site.

Ancient Monuments and Archaeological Areas Act 1979

Empowers Scottish ministers to compile a schedule of any monuments that appear to them to be of national importance (scheduling). Under the terms of this Act Scheduled Monument Consent is required for any works that would demolish, destroy, damage, remove, repair, alter or add to a scheduled monument or to carry out any flooding or tipping on a scheduled monument.

Planning (Listed Building and Conservation Areas) (Scotland) Act 1997

Empowers Scottish Ministers to compile or approve a list of buildings of special architectural of historic interests (listing). Under the terms of this Act Listed Building Consent is required for the demolition of a listed building, or its alteration or extension in any manner which could affect its character as a building of special architectural or historic interest.

The Town and Country Planning (General Development Procedure) (Scotland) Order 1992 as amended.

Requires planning authorities to consult Scottish Ministers on developments which may affect a historic garden or designed landscape identified in the Inventory of Gardens and Designed Landscapes in Scotland.

Clean Air Act 1973

Prohibits the emission of dark smoke.

The Prohibited Procedures on Protected Animals (Exemptions) (Scotland) Regulations 2007

These Regulations exempt certain procedures from the general ban on interfering with the bone structure or sensitive tissue of an animal other than for medical treatment. These exemptions allow a number of farming practises on livestock such as ear tagging and notching, tail docking, castration, tusk trimming, dehorning and disbudding

The Zoonoses (Monitoring) (Scotland) Regulations 2007

Makes provision in Scotland for the administration and enforcement of Directive 2003/99/ EC on the monitoring of zoonoses and zoonotic agents, amending Council Decision 90/424/ EEC and repealing Council Directive 92/117/ EEC.

Veterinary Medicines Regulations 2007

Maintains and strengthens existing safeguards and to promote the safe, effective and responsible use of veterinary medicines.

The Animal Health and Welfare (Scotland) Act 2006

Makes it an offence to cause a protected animal unnecessary suffering and places a duty on those responsible for animals to take whatever steps are reasonable in the circumstances to ensure that the welfare needs of the animals are met. It also gives inspectors power to seize animals which are suffering or are in danger of suffering.

The Welfare of Animals (Transport)(Scotland) Regulations 2006

Enforce Council Regulation ( EC) 1/2005 which sets minimum conditions which must be met when animals are being transported as part of an economic activity.

The Diseases of Animals (Approved Disinfectants) (Scotland) Order 2008

Provides for the authorisation of certain disinfectants for use against listed disease causing agents.

The Animal By-Products (Scotland) Regulations 2003

Prohibits the on-farm burial, or burning, of fallen stock.

Disease Control (Interim Measures) (Scotland ) Order 2002

Imposes restrictions on the movement of Foot and Mouth Disease susceptible animals.

Feeding stuffs (Scotland Regulations 2000

Welfare of Farmed Animals (Scotland) Regulations 2000

These Regulations transpose a number of EC Directives which set out minimum welfare standards for the protection of animals kept for farming purposes and specifies specific conditions for laying hens raised in battery cages, calves, pigs and rabbits.

Welfare of Farmed Animals (Scotland) Amendment Regulations 2003

Amend the Welfare of Farmed Animals (Scotland) Regulations 2000 by transposing EC Directives 2001/88/ EC and 2001/93/ EC.

Welfare of Animals (Slaughter and Killing) Regulations 1995

Transpose EC Directive 93/119/ EC on the protection of animals at the time of slaughter. The Regulations apply to the movement, lairaging, restraint, stunning, slaughter and killing of livestock and poultry.

Animals (Scotland) Act 1987

Makes provision for Scotland with respect the detention of straying animals.

3.1.3.2 Strengths and weaknesses of the Environment and Land Management

Based on the evidence provided above, Table 3.5 summarises the strengths and weaknesses of the environment and land management and notes the implications for the SRDP.

Table 3.5: Environment and Land Management: Strengths and Weaknesses

Strengths

Weaknesses

Biodiversity and landscape

  • Unique combination of flora and fauna.
  • Priority species and habitats already identified through the biodiversity action plans.
  • Scotland's landscapes are a major asset, contributing to national identity and local distinctiveness, and supporting the tourism sector.
  • Agri-environment and forestry schemes have increased awareness and interest by land managers of wildlife and the environment.
  • Local landscape designations are a well-established approach to protecting and guiding change in areas of particular landscape importance in Scotland.

Implies that the programme needs to continue to conserve the unique biodiversity.

Biodiversity and landscape

  • Intensive farming in some areas has led to biodiversity loss, including fewer birds and waders, a decline in active management of upland grazing, and moorland/peatland loss.
  • A significant proportion of sites designated for their environmental value require management to achieve favourable condition.
  • Farming practices can lead to adverse changes in local landscapes (e.g. loss of hedges, construction of intrusive structures).

Implies that the programme needs to target areas with poor biodiversity, including land of high nature value.

Implies that further consideration be given to how measures impact on local landscapes.

Water

  • Water environment generally good.
  • Peaty soils in uplands have high water retention capacity which moderates run-off variations from high rainfall levels.

Implies that the programme should focus on agricultural practices related to water quality.

Water

  • Nitrate run off from agricultural land is a problem in some areas.
  • Winter flooding is a problem in some areas.

Implies that the programme needs to address pollution by nitrates.

Climate Change

  • Land use sector - particularly forestry - acts as a carbon sink.
  • The concept of habitat networks is becoming well established in spatial planning processes.

Implies that the programme needs to build on potential role of agriculture and forestry in mitigating and adapting to climate change.

Climate Change

  • Agriculture emits greenhouse gases, particularly methane and nitrous oxide.
  • Agriculture contributes to air pollution via ammonia emissions.

Implies that the programme needs to encourage farming practices that reduce emissions, including adaptation measures.

Bio Energy

  • Advantages of biomass: potential as a heat source as well as electricity, ability to produce energy without intermittency, and contribution to the rural economy.
  • The main feedstock is wood and further resource may be available from secondary processing.
  • Short rotation coppice is believed to hold the most potential, but there is also potential for oilseed rape.

Implies that the programme potential role of agriculture and forestry in developing biomass

Bio Energy

  • Potential adverse effects on soils and biodiversity of increasing bioenergy production
  • Limited commercial experience of short rotation coppice in Scotland.

Implies that careful planning is necessary to minimise potential adverse effects.

Soil

  • Scottish soils are generally in good health
  • Fertiliser use relatively stable or declining.

Implies that the programme needs to continue with measures to change fertiliser practices.

Soil

  • Soil losses from agriculture is the main source of diffuse pollution.
  • Erosion by run-off and floodwater increases soil losses.
  • Main threat to soil quality is soil organic matter loss, e.g. through intensive farming on arable land and overgrazing on peatlands.
  • Limited data exist on soil quality.

Implies that the programme needs to focus on reducing soil loss from agriculture as well as better monitoring.

3.1.4 Rural economy and quality of life

3.1.4.1 Current situation

Rural economy

The rural economy in Scotland comprises a broad range of activities. There has been diversification away from the primary industries of agriculture, forestry, fishing and energy, and growth in the contribution of other activities, particularly in the tertiary (service) sector.

In terms of GDP, 68% of Gross Value Added ( GVA) in rural areas (based on NUTS 3 areas that are "predominantly rural") is derived from the tertiary sector (baseline lead objective indicator 33), 27% is derived from secondary sector and 4% is derived from the primary sector. The total value of GVA is the secondary and tertiary sector in 2003 was €40,563 million) (baseline lead objective indicator 29). The tertiary sector also accounts for a substantial proportion of rural employment, supporting 43% of jobs compared to 11% in the primary sector and 30% in the secondary sector. Together, employment in secondary and tertiary sectors amounts to 415,000 ( baseline lead objective indicator 28).

Small firms (those with 0-49 employees) are characteristic of rural Scotland, particularly in remote rural areas where they support 84% of employment. This compares with 61% of employment in accessible rural areas, and 33% in the rest of Scotland (2004 figures). Business start-up rates per head of population are higher in rural areas, suggesting that they are relatively entrepreneurial. Rural areas accounted for 48% of all business start-ups in Scotland in 2004.

Accessible rural areas show a greater dependency on secondary activities, manufacturing accounting for 22% of all employees. Services are also important, in the form of education and health (16% of all employees) and financial services (14% of all employees).

Remote rural areas still rely significantly on primary industries which, in 2004, accounted for 21% of all employees. However, other sectors are also important, notably the services sector - wholesale, retailing and repairs (16% of all employees) and education and health (14% of all employees).

Recreation and tourism also play a significant part in the rural economy. There are over 200,000 tourism-related jobs in Scotland (almost 9% of total employment), and many of these are in rural areas. In 2005, 71% of all visits to Scotland (17.3 million) were to areas outside Edinburgh and Glasgow (Scotland's largest cities), and 65% of total tourism spend (€6.1 billion) took place outside these cities. The outstanding quality of rural Scotland's natural and historic environment has underpinned opportunities to develop rural recreation and tourism and has played an important part in diversifying the land-based sector: for example, through the provision of accommodation, marketing of local products and access and recreational facilities. There is increasing interest in rural tourism and recreation and in the environment, so further opportunities exist to develop the tourism sector and bring added value to the rural economy. Recreation activities include passive enjoyment of the countryside and active pursuits such as hill-walking, climbing, skiing, cycling, mountain-biking, horse-riding, bird watching and water-based activities.

Access and Recreation

Access to the countryside is widely enjoyed by the public for passive recreation and active pursuits. Approximately 200 million visits are made to rural Scotland annually 9 by Scottish residents. A substantial proportion of these visits (approximately 50 million) are made to forests and woodlands which provide major access and recreation opportunities.

Public access to and enjoyment of the countryside has been reinforced by recent legislation (the Land Reform (Scotland) Act 2003) that provides for a responsible right of access to most land and inland water across Scotland. The Act also establishes new duties and powers for local authorities and National Park authorities, to ensure that access rights are not obstructed, a system of core paths is implemented, and local access forums established. Guidance on the responsible exercise of access rights, and responsible land management is set out in the Scottish Outdoor Access Code, approved by the Scottish Parliament in July 2004. Scotland's access rights drew upon European and Scandinavian models as the legislation was developed during the passage of the Bill, and the resulting Act provides some of the foremost statutory rights for public access to be found anywhere in Europe.

Other relevant policy developments in recent years includes SNH's policy statement 'Enjoying the Outdoors - supporting participation and sharing the benefits'; implementation of Scotland's Physical Activity Strategy; the National Transport Strategy commitment to walking and cycling; and the Scottish Forestry Strategy emphasis on health and recreation outcomes. These are collectively responding to a strong need to deliver health improvements and related environmental benefits. A key action is to improve opportunities for physical activity and to boost overall participation. The outdoors has an important role to play in this respect, particularly on farm and forestry land close to where people live. But, it is essential to properly fund and manage this activity in order to minimise recreational impacts on land management while achieving wider social and environmental outcomes.

The emphasis of the Act is on the local management of access. Access authorities have a duty to plan for a system of core paths, which will be a major element in enabling all members of the public to exercise their right of access and in managing access. However, the physical formation and care of any paths will remain part of normal land management operation. Access and recreation facilities benefit from careful planning, construction and management to avoid environmental damage that can, for example, result from erosion, and to fit best with demand and with management of the land. Further work is needed to facilitate public access through clearly marked and well maintained paths, tracks and other facilities, and through supporting access and recreational uses of land areas more extensively. Land managers have an important role in the development and management of paths and other facilities for access, and in enhancing public enjoyment and understanding of the countryside, including visitors' understanding of the contribution made by agriculture and forestry to the rural environment and communities. Scotland's progressive new access rights are now an important feature of rural land management and present opportunities for communities, tourism operators and for rural development throughout the country.

Quality of life and access to services

There is evidence that people in rural communities generally enjoy a good quality of life. Recent research shows that rural areas receive higher approval ratings of "neighbourhood as a place to live" than urban areas. When surveyed in 2004, 73% of people living in remote rural areas rated their neighbourhood as very good compared to 66% of those in accessible rural areas and 49% of those in the rest of Scotland.

People living in rural areas are more likely to be involved in their communities than those in urban areas. In 2004, 35% of those in remote rural areas gave up time to help as an organiser/volunteer compared to 30% in accessible rural and 22% in rest of Scotland. This willingness to engage in the local community suggests that continued capacity building in local communities may bring further benefits for rural development.

In terms of life long learning in rural areas, 24% of adults aged 25-64 have participated in education and training (baseline lead objective indicator 35).

Nevertheless, rural deprivation does exist in Scotland, although this is sometimes less concentrated and is "hidden" within relatively affluent areas of the countryside. It can, therefore, be difficult to identify. Deprivation is most commonly associated with poor access to services.

In general, there are poorer levels of access to services in rural areas than in the rest of Scotland. Nearly 20% of remote rural areas are more than a 15 minute drive away from their medical General Practitioner (compared to 0% in the rest of Scotland) and around 30% are more than 15 minute drive away from a petrol station (compared to 0% in the rest of Scotland).

Car ownership is higher in rural than urban areas. However, 17% of households in both remote rural and accessible rural areas do not have access to a car which, given the lower provision of public transport, such as less frequent bus services, makes it more difficult for people in rural areas to access services.

In 2006, 52% of households in rural areas had a broadband internet connection (baseline lead objective indicator 32). Increasing access to the internet and broadband has improved connectivity of rural areas and access to services more generally. Broadband coverage in Scotland is comparable to that of the UK at 99.6% The recent Broadband Reach Project saw around 2100 premises without broadband access taking up the offer of internet provision. This means that only a very small percentage - under 0.4% - of premises in Scotland remain unable to be connected to broadband. Given that these premises are largely in more remote, less accessible areas, the cost of provision of broadband services is likely to rise significantly due to the geographic spread of and local conditions encountered by the relatively small number of premises concerned. Thus, with the limited funding available from the European Commission from The Economic Recovery Plan (2.9m Euros) combined with the relatively high set up cost associated with a stand-alone rural development programme measure for delivering broadband.(approximately 600,000 Euros), it was felt that better value for money and greater benefits would be achieved through assigning this funding to the New Challenges identified by the European Commission.

Culture

Rural Scotland has a diverse and vibrant cultural and architectural heritage, reflected in its many historic buildings, architectural features and archaeological sites, rich history, musical traditions and regional languages and dialects. Scotland's culture and history is a major public asset and draw for tourists. There are over 250,000 sites of archaeological interest in Scotland, of which 7,800 are designated as scheduled monuments due to their special importance. In addition, there are 47,000 buildings within Scotland that are 'listed' under planning law for their national and/or local importance. In 2001, 4% of the Scottish population had knowledge of Gaelic language although this figure increased to 11% in remote rural areas. Land-use patterns and lifestyles associated with crofting townships (see section 3.1.2) also represent an important dimension of the cultural heritage of the remote north and west of Scotland. The importance of culture in Scotland is widely recognised, but detailed information on the importance of cultural assets to rural Scotland has yet to be collated.

3.1.4.2 Strengths and weaknesses of Rural Economy and Quality of Life

Based on the evidence provided above, table 3.6 below summarises the strengths and weaknesses of rural economy and quality of life and notes the implications for the Scotland Rural Development Programme.

Table 3.6: Rural Economy and Quality of Life: Strengths and weaknesses

Strengths

Weaknesses

Rural Economy

  • Diversification of the economy away from primary industries already occurring and service sector dominates.
  • Tourism an important part of the rural economy.
  • Business start ups in rural areas suggest entrepreneurship.

Implies that the programme should continue with the restructuring of the economy away from primary industries where appropriate building on tourism and service sector strengths.

Rural Economy

  • Low economic growth from primary industries,
  • Businesses are small and potentially low growth.

Implies that the programme should encourage diversification away from primary industries will yield greater economic benefits and that it should encourage innovation.

Access and recreation

  • Statutory rights of responsible access to land for recreational purposes exist.
  • Access authorities have a duty to plan for core paths.

Implies that the programme should build on current rights and promote further recreation and amenity in Rural Scotland.

Access and recreation

  • Poorly constructed and managed paths can result in soil erosion.

Implies that the programme address the condition of access paths

Services

  • Internet and broadband access increasing.
  • Land Reform legislation has underpinned public access to the countryside.

Implies that the programme should encourage further improvements to infrastructure so that opportunities associated with improved connectivity can be taken.

Services

  • Access to services deprivation is high across all of rural Scotland.
  • Further improvements are needed to paths and facilities for those visiting the countryside.

Implies that the programme should introduce measures that will improve access to services and enhance paths and facilities for visitors.

Culture

Culture

  • Many buildings and sites of historic interest.
  • Important cultural heritage including diverse languages and dialects.

Implies that the programme should build on the cultural strengths and promote measures that are based on the historic and cultural environment.

  • Sparse and (in some areas) falling population leading to decline in tradition.
  • Poor maintenance of some features of the historic environment.

Implies that the programme should facilitate cultural projects and improve management of historic environment sites.

Human potential

  • High rates of participation in voluntary work and community activity.

Implies that the programme should build on the human potential and encourage capacity building in rural areas.

Human potential

  • Pockets of deprivation exist that are difficult to measure.

Implies that the programme should recognise that rural deprivation does exist which may affect quality of life in rural areas.

3.1.5 LEADER

3.1.5.1 Current situation

LEADER+ operated under the auspices of Structural Funds programmes in Scotland during the 2000-06 programming period as one of the four Community Initiative Programmes. The other programmes run over the same period were URBAN, EQUAL and INTERREG. The initiatives often include pilot projects/test beds for activity which have now been mainstreamed into the larger funds.

The aim of INTERREG IIIB was to encourage inter-regional and trans-national co-operation. Scotland participated in four INTERREG IIIB programmes - Northern Periphery, North Sea, Atlantic Area and North West Europe. There was also a relatively small amount of funding for inter-regional co-operation available under the INTERREG IIIC programme which was available to all areas of Scotland.

The URBAN II European Programme (2000-2006) was aimed at promoting innovative strategies for sustainable economic, social and environmental regeneration in urban areas of particular disadvantage.

The European EQUAL Initiative (2000-2006) aims to find new ways of combating discrimination and testing new approaches in connection to the labour market. The Scotland Programme was worth around £25 million until 2006. In the first round of funding there were 7 Scottish Development partnerships and in the second round there were 11.

Other funding for rural areas was provided through the 2000-2006 Structural Funds and Scotland Rural Development Plan. These were the mainstream programmes with LEADER making the links between them and providing complementary support for projects in rural areas which otherwise would not have received funding using the bottom up approach.

Almost €28m of European funding was provided to support 13 LEADER+ areas in Scotland:

  • Argyll, the Islands and Lochaber;
  • Cairngorms;
  • Dumfries and Galloway;
  • East Fife;
  • Lomond and Rural Stirling;
  • Moray;
  • North Highland;
  • Northern Isles;
  • Rural Tayside;
  • Scottish Borders;
  • South Lanarkshire;
  • Tyne Esk (covering parts of East and Mid Lothian); and
  • Western Isles, Skye and Lochalsh.

Table 3.7 Population and surface area of 2000-06 LEADER+ areas

Area

Population
(Inhabitants)

Surface Area
(km 2)

Argyll, the Islands and Lochaber;

88,436

11,444

Cairngorms;

23,658

6,516

Dumfries and Galloway;

144,856

6,396

East Fife;

59,430

464

Lomond and Rural Stirling;

28,679

2,437

Moray;

86,000

2,238

North Highland;

50,408

12,833

Northern Isles;

41,920

1,468

Rural Tayside;

94,873

6,071

Scottish Borders;

108,280

4,743

South Lanarkshire;

75,477

354

Tyne Esk;

68,528

837

Western Isles, Skye and Lochalsh

39,600

8,506

Total

910,145

64,307

*Source: http://ec.europa.eu/agriculture/rur/leaderplus/memberstates/uk_b.htm#

The total population covered by the LAG areas was 910,145 (this amounts to 87% of the rural population) (baseline lead objective indicator 36). The principal aim of LEADER+ was to promote community and economic development in rural areas. Based on a grassroots approach, it encouraged and supported projects for local rural development with a strong emphasis on co-operation and networking between rural areas. The programme supported innovative and pilot projects, giving communities an opportunity to try out new approaches to improve the quality of life in their local area.

Each LEADER+ area developed a strategy, set out in a business plan for the area based on at least one of the following "themes":

  • the use of new know-how and new technologies to make the products and services of rural areas more competitive;
  • adding value to local products, in particular by facilitating access to markets for small production units via collective actions;
  • making the best use of natural and cultural resources, including enhancing the value of sites of community interest selected under Natura 2000; and,
  • improving the quality of life in rural areas.

Responsibility for each LEADER+ area rested with a Local Action Group ( LAG) which implemented the initiative locally. Local Action Groups were made up of representatives of the rural community and local organisations and agencies that operate in the rural area.

3.1.5.2 Strengths and Weaknesses

The mid-term evaluation showed significant scope to improve the implementation of LEADER+ in Scotland. While the value of the initiative has been recognised, key findings from the mid-term evaluation of LEADER+, shown in Table 3.8 below, demonstrate that further improvements in data collection are needed and that levels of innovation had been disappointing. However, there was evidence of good partnership working and the development of a more strategic approach. The evaluation provided useful pointers for mainstreaming this innovative initiative within existing development programmes. The main recommendations concerned improvements to administrative systems and to monitoring and evaluation processes.

Table 3.8 Key findings from the Mid Term Evaluation of LEADER +

Aspect of Programme

Findings

Financial Progress

  • Slow progress committing and spending resources.
  • Shortcomings in maintenance of financial records.

Physical Progress

  • Poor information on physical data, reflecting weaknesses in the monitoring and evaluation framework.
  • Targets were unrealistic. Indicators have been reported predominantly against outputs rather than impacts or outcomes.

Management of the Programme

  • Failure to realise that standard management systems are not incompatible with bottom up approach.
  • Operation of a delegated implementation system requires considerable management and capacity at the centre.

Application of LEADER approach

  • Strong focus on assets of area, particularly around national parks.
  • Partnership is being enhanced generally.
  • Innovation was limited and tended to operate under a definition of activity that has not previously been applied at a local level. Little innovation in terms of process.

Community Value Added

  • Most value was found to be added through enhanced partnership working and, in some areas, development of a strong strategy.
  • Less value than might have been expected in terms of mainstreaming rural development.
  • Disappointing level of innovation and transfer of good practice.
  • Limited impact of delivery from the formulisation of equal opportunities and sustainable development.

Recommendations

  • Improve financial recording keeping.
  • Standardised administrative systems.
  • Fostering and mainstreaming innovation.
  • Strategy required for fostering and mainstreaming innovation.

3.2 Strategic approach to Scotland's Strengths and Weaknesses

The analysis of strengths and weaknesses in Section 3.1 illustrates the diversity of rural Scotland and shows that there are wide-ranging objectives for rural development in Scotland. The new Rural Development Regulation (1698/2005) recognises the breadth of such objectives by providing for support under three themes described as Axes. These Axes are described in more detail in Chapter 5 but concern respectively competitiveness in agriculture and forestry, the environment and countryside, and economic diversification and quality of life. Many of the objectives in the 2007-13 SRDP are cross-cutting and require an integrated approach across the Axes. A major aim of the SRDP is to bring economic, social and environmental measures together under a single programme of support.

The main focus of the SRDP will be to provide support that contributes to policy outcomes which will form the rationale for the priorities in the Programme and the measures that will be used to attain them.

Based on the analysis of strengths and weaknesses, the priority in rural Scotland under Axis 1 is to support business viability in order to add value in the rural economy and enable the agriculture, forestry and agri-food sectors to adapt to market conditions pending further reform of the Common Agricultural Policy and Rural Development Programmes after 2013. Specific priorities include the need for additional or better income streams, the development of processing facilities to add value locally, and encouragement of collaboration amongst producers and processors. Access to training and business information will also play an important role in enabling businesses to improve their viability and competitiveness.

Central to our approach under Axis 2 is the implementation of coherent and integrated measures to meet environmental outcomes. Specific priorities include the need to address biodiversity objectives and obligations, combat diffuse pollution and mitigate and adapt to climate change. We must also meet substantial ongoing financial commitments that result from agreements entered into under the 2000-06 Rural Development Programme (see Tables 5.1 and 6.3). The effects of land management on the quality of landscapes, biodiversity and historic sites, also exerts a wider influence on the economic and social opportunities for rural Scotland. Collaborative approaches will be encouraged in the SRDP in order to achieve landscape-scale improvements in the countryside.

Under Axis 3, the Programme focuses on encouraging private enterprise and entrepreneurship, improving services and infrastructure at a local level and supporting Scotland's culture through the enhancement of rural architectural and archaeological heritage. Economic opportunities exist in developing products and services that build on the natural and historic assets of rural Scotland. Capacity-building and innovation will be necessary to ensure that rural communities identify suitable actions and are equipped with the necessary skills to carry them out. The LEADER initiative will play an especially important role in building such an approach under Axis 3 although it will also support actions under the other two Axes.

In financial terms, we will allocate approximately 14% of rural development spending to Axes 1 and 12% to Axis 3. The majority of funding will be allocated to measures available under Axis 2 to protect and enhance the environment and countryside (69%) . Around 5.6% of resources will be allocated to LEADER. This distribution of funding reflects the very significant role of land management in protecting and enhancing the environment and, in turn, the impact of land management on the viability of rural businesses and the cohesiveness and sustainability of rural communities.

3.3 The ex ante evaluation

This section briefly summarises the key findings from the ex ante evaluation, focusing on the lessons that have been learned, and summarises the priorities, using the evidence presented in the ex ante evaluation. The complete ex ante evaluation is presented in Annex 1 of this Programme document. A Strategic Environmental Assessment has also been carried out and is presented in Annex 2.

The ex ante evaluation identifies a strong rationale for the socio-economic measures and environmental measures proposed in the 2007-13 SRDP. It found, however, that it would be preferable to have had more evidence from which to draw conclusions about the likely contribution of many of the proposed schemes. For the Less Favoured Area Support Scheme ( LFASS), significant changes are anticipated from 2010 and research is currently underway to inform these changes. For agri-environment schemes, results of monitoring are not yet available although an independent review of agri-environment schemes was carried out in early 2007. For LEADER and the processing and marketing grants scheme, evaluations have highlighted issues for the future including a need for further facilitation and integration. The main ex-post evaluation of the 2000-06 SRDP will be carried out after the end of the 2000-06 programming period.

The ex ante evaluation also identifies a need to bring closer integration between the range of rural development schemes that exist. This will potentially reduce costs of delivery for both public sector and beneficiaries. Some of these schemes are sponsored by the Scottish Executive and some by other bodies so there is a need for a multi-agency approach in many cases.

The implementation of the new SRDP is affected significantly by the need to meet ongoing commitments from the 2000-06 Programme, and the need to meet minimum spend requirements under the different Axes of the new RDR. The former will ensure significant continuity between the 2000-06 and 2007-13 Programmes. The latter, however, will result in significant changes in the new Programme, whereby a greater proportion of funds are spent on measures to support competitiveness and to strengthen the economy and quality of life in rural areas.

The ex ante evaluation makes a number of recommendations on priorities for the new Programme. These are summarised in the table 3.9 below.

Table 3.9 Recommendations from the ex ante evaluation for the 2007-13 SRDP

Delivery of the SRDP

  • There should be a close fit between national and EU objectives. Targeted support is required under each Axis in order to focus on key objectives and make best use of available resources. Existing measures under the Land Management Contracts Menu Scheme provide an example of this approach.
  • Active support is needed to facilitate economic development and achieve a market-focused approach. Measures are needed to improve performance and encourage diversification within the agriculture and forestry sectors, and to encourage the emergence of new industries (e.g. renewable energy) and linkages between different activities (e.g. land-use and tourism).
  • There is a need to manage expectations among beneficiaries of what can be delivered and to ensure stability in the farming sector by avoiding dramatic rises in voluntary modulation.

Integration

  • Further integration is desirable between different streams of funding for rural development and between relevant agencies, including the Scottish Executive, Forestry Commission Scotland, Scottish Natural Heritage and the Enterprise Network. The current Processing and Marketing Grant Scheme is an example of one where there is a close fit between the Executive and the Enterprise Network.
  • Integration would lead to a more holistic SRDP that addresses the economic, social and environmental arms of sustainability in line with the new Rural Development Regulation.

Facilitation

  • There is a need to facilitate local capacity-building and to identify priority areas using relevant sources of data and evidence (for example, indexes of deprivation, or areas identified with high pollution).
  • A network could be used to facilitate such action through the SRDP, using local offices of the Scottish Executive/ FCS, LECs, advisory services (e.g. Scottish Agricultural College) and existing LEADER partnerships.
  • Inclusion of different age groups merits attention; for example, engaging older people and younger people in LEADER. Qualification levels of young people (16-24) could be targeted, working with Careers Scotland.

Monitoring

  • There is a need to develop simpler, more effective monitoring systems with an increased focus on outcomes. These systems should be capable of regularly reporting progress towards EU and national objectives.
  • Measurement of changes in behaviour and attitude is needed among land managers, for example as part of monitoring of agri-environment measures.

LFASS

  • Clarity is needed over the contribution of LFASS to economic/social and environmental benefits - further work should be conducted on the outcomes delivered by LFASS and on its objectives.
  • Value for money could be improved through changes to the scheme.

Agri-environment measures

  • Greater clarity of outcomes from agri-environment measures is required in the new Programme. A fuller understanding of their impacts would help to target future funding on the most effective measures.
  • Better guidance for applicants is required on the conditions for acceptance into the measures (especially those in the Rural Stewardship Scheme but also the Organic Aid Scheme).
  • A higher level environmental scheme should be established, incorporating SNH Natural Care scheme.

LMC Menu Scheme

  • Ability to engage wider numbers of farmers could lead to increased interest in environmental and other improvements. There should be a requirement for evidence of additionality and an appropriate balance between measures in any funding applications.

Forestry

  • Reducing the complexity of the Scottish Forestry Grant Scheme would be welcomed.
  • There is potential to integrate forestry and agricultural land uses, and achieve co-ordinated (and efficient) delivery of economic, environmental and social outcomes.
  • Further extending the area of woodland managed in accordance with the UK Woodland Assurance Scheme will increase the sustainability of woodlands.

Business development measures

  • Incorporation into the SRDP of measures for business development that are currently supported as State Aids would broaden the scope of the Programme and improve its contribution to sustainability.
  • An increased focus on business planning for business development schemes is required in order to foster a strategic and properly thought-through approach to using these measures.

3.4 Impact from the previous programming period

This section describes the measures that were funded under the 2000-06 SRDP, and draws lessons for the 2007-13 SRDP.

3.4.1 Description of the 2000-06 SRDP and the resources allocated

The regulatory basis for the 2000-06 Rural Development Programme was set out in Council Regulation ( EC) 1257/1999 under Title II - Rural Development Measures. The regulation was implemented in Scotland through schemes both within and outwith the framework of the 2000-06 SRDP, although more schemes were brought into the Programme later in the 2000-06 programming period. The 2000-06 Programme focused on three Chapters of the RDR initially (see Table 3.10), with two other Chapters being funded under state aid approval using domestic funds. A series of amendments were made subsequently. The most significant of these was in 2004 when schemes were added under the previously unused Chapters 1, 3 and 9 of the RDR. These schemes included training, animal health and welfare, quality assurance and the concept of Land Management Planning, and were introduced under the Land Management Contracts Menu Scheme (see Chapter 5). These amendments represented a significant broadening of the objectives for the Programme. The use of RDR Chapters in the 2000-06 Programme is summarised in Table 3.10 below. The middle column shows the schemes that were formally part of the 2000-2006 Programme. The right-hand column shows the schemes that were additional state-aided measures.

Table 3.10 Use of RDR (1257/99) Chapters in the 2000-06 Programme

Chapters of the RDR

EU co-financed

State aid

Chapter 1 - 'Investment in Agricultural Holdings' Articles 4-7

vadded in 2001 - ABDS10 in 2001

vadded in 2004 - FBDS

Chapter 2 - 'Setting up Young Farmers' Article 8

Chapter 3 - 'Training' Article 9

vadded in 2004

Chapter 4 - 'Early Retirement' Articles 10-12

Chapter 5 - 'Less Favoured Areas & Areas with Environmental Restrictions' Articles 13-21

v

Chapter 6 - 'Agri-environment' Articles 22-24

v

Chapter 7 - 'Improving Processing and Marketing of Agricultural Products' Articles 25-28

v

Chapter 8 - 'Forestry' Articles 29-32

v

Chapter 9 - 'Promoting the Adoption & Development of Rural Areas' Article 33

v added in 2004

Table 3.11 below sets out the total payments made across RDR schemes in the three key areas in 2004. LFA Scheme ( LFASS) accounted for the bulk of the funds at 52% followed by the agri-environment related schemes at 25% and the forestry related schemes at 15%. Significantly, Land Management Contracts did not open until 2005 and so are not included in this table, which therefore implies a narrower spending base under the 2000-06 Programme than was eventually the case.

Table 3.11 Payments made by Rural Development Regulation Chapter, 2004

TOTAL
(€'000s)

AVERAGE
PAYMENT

TOTAL
(€'000s)

AVERAGE
PAYMENT

TOTAL
(€'000s)

AVERAGE
PAYMENT

Less Favoured Areas
Support Schemes

Agri-Environment Related

Forestry Related

Scotland Total

87,910

6,798

42,004

6,246

25,191

3,927

Percentage allocation

52%

25%

15%

Processing and Marketing

Diversification

LMC Menu Scheme

Scotland Total

7,008

72.9

7,450

23,656

-

-

Percentage allocation

4%

4%

-

-

Source: Scottish Executive

The introduction of the LMC Menu Scheme resulted in new commitments which amounted to €26.9m in 2005 (based on an exchange rate of £1 = €1.5). If this additional funding is considered, the LMC Menu Scheme accounts for 13% of funds and the significance of LFASS drops to below 45%.

A major focus of spending in the 2000-06 Programme was LFASS, which has an approximate annual spend of €89 million. It reached 13,000 beneficiaries and payments covered 3.4 million hectares of agricultural land. LFASS supports the continuation of farming, crofting and other economic activity in Less Favoured Areas, and thus is significant in maintaining traditional agricultural landscapes and, in turn, the flora and fauna that are dependent on these. The mid-term evaluation highlighted that LFASS was achieving its objectives, although the analysis conducted for the ex ante evaluation highlights options to improve value for money.

The other major object of spending in the 2000-06 Programme has been agri-environment and forestry schemes. High levels of demand put pressure on the resources for these schemes, particularly in the later phases of the Programme. Total expenditure on the Rural Stewardship Scheme ( RSS) and the Organic Aid Scheme ( OAS) in 2004 was €42 million. Of this, 48% was spent on maintaining ongoing commitments from the Environmentally Sensitive Areas ( ESA) scheme and the Countryside Premium Scheme ( CPS), both of which are now closed to new entrants. Throughout the running of the RSS, demand has exceeded the resources available - this was most evident in 2006. Forestry measures account for approximately 15% of SRDP expenditure and approximately 25-30% of that expenditure is taken up by grants for farm woodlands. These were also heavily oversubscribed in 2006. As indicated above, the Land Management Contract Menu Scheme has committed significant funds. It is a non-competitive scheme and is available to all land managers within their individual allowances.

3.4.2 Key findings from the evaluations of the 2000-06 Programme

This section summarises the key findings from evaluations of the 2000-06 Programme (both the mid-term evaluation and the ex ante evaluation of the new Programme) under the following headings:

  • Less Favoured Areas Support Scheme ( LFASS);
  • Agri-environment schemes;
  • Forestry schemes;
  • LMC Menu Scheme;
  • Processing and Marketing; and
  • Diversification.

LFASS

The stated objective of the LFASS scheme was 'to maintain a viable agricultural community and thus help develop the social fabric of rural areas by ensuring a fair standard of living for farmers and by off-setting the effects of natural handicaps in mountain and less favoured areas'. Farms are designated as being in less favoured areas if the location is characterised by:

  • Permanent handicaps (e.g. altitude, poor soils, climate, steep slopes);
  • Undergoing depopulation or having very low densities of settlements; and,
  • Experiencing poor drainage, having inadequate infrastructure or needing support for rural tourism, crafts and other supplementary activities.

The SRDP Mid-term Evaluation (2003) 11 found that LFASS played an important role in supporting farm business viability, and that in its absence:

"…only 4% of sheep farms, between 23-36% of mixed cattle and sheep farms and between 32-47% of specialist cattle farms would have incomes which were comparable (but low) to lowground cattle and sheep farms. Currently LFASS accounts for between 50-60% of the estimated shortfall in sheep LFA farms. By comparison, while specialist cattle farms as a group are potentially over-compensated the large performance variability experienced (by all LFA farm types) disguise the fact that for between 33-41% of these farms compensation is still insufficient. Cattle and sheep farms are intermediate in performance between the two specialist extremes."

Overall, evaluations of LFASS have concluded that the disadvantages associated with farming in LFAs are substantial.

Agri-environment schemes

The Rural Stewardship Scheme ( RSS) was launched in 2000, and in effect merged the Environmentally Sensitive Area ( ESA) scheme and Countryside Premium Scheme ( CPS). It has been the main vehicle for ongoing funding of new environmentally friendly farming practices in Scotland. Although applications for the CPS and the ESA schemes closed in 2000, contracts are for 5 or 10 years, and beneficiaries may be offered automatic transfer into the RSS when their 5-10 year contract expires. The Organic Aid Scheme ( OAS) also provided support through 5 year contracts for conversion to organic farming throughout the previous SRDP period 2000-2006, and support for maintenance of organic farming has been available since 2004. Payments are made to participants on the basis of 'income foregone' (the loss of income to the participant from farming areas of land in an environmentally way), additional costs resulting from the commitment and sometimes a degree of 'incentive' to participants for farming in an environmentally friendly manner. The mid-term evaluation of the SRDP highlighted that as at 2003:

'Some 33% of the total agricultural area in Scotland is now maintained under the Code of Good Agricultural Practice ( COGAP) and General Environmental Conditions ( GECs), though the actual area under active management is closer to 10%. This level is a substantial achievement and is set to increase further.'

Overall, the mid-term evaluation concluded that the lack of monitoring information has meant that there has not been sufficient information to measure the environmental impacts of agri-environment schemes. Nevertheless, case study information found tangible environmental benefits resulting at the local level. Initial assessments of corncrake and common bird numbers suggest that the schemes have generated significant environmental improvements.

Forestry schemes

The main support mechanism for forestry was the Woodland Grant Scheme ( WGS) until 2003. The WGS was then replaced by the Scottish Forestry Grants Scheme ( SFGS) and the SRDP revised to accommodate this change.

Support was also available to encourage the creation of new woodlands on agricultural land by offering annual payments to compensate for agricultural income foregone. This support was originally known as the Farm Woodland Scheme ( FWS), but in 1992 its name was changed to the Farm Woodland Premium Scheme ( FWPS) and, in 2003, to the Farmland Premium. Annual payments under the FWS and the FWPS are available for a period of up to 15 years from the time trees are planted .

A long-term perspective shows that the agricultural and forestry sectors tended to operate and develop independently of each other, and were often perceived as competitors for land. The introduction of schemes in the early 1990s targeted at farmland has helped to encourage a more integrated approach to land management across the two sectors.

Overall, forestry schemes have led to an increase in wooded area and wood production, and have retained employment in rural areas. The schemes have been successful in delivering wider environmental (e.g. biodiversity and landscape) and social (e.g. recreational) benefits. Targeted support for processing would further improve the benefits that are generated by forestry schemes.

Land Management Contract Menu Scheme

At the time of the mid-term evaluation of the 2000-06 Programme, the Land Management Contract Menu Scheme ( LMCMS, also known as Tier 2) had not been introduced. The LMCMS was designed to deliver economic, social and environmental benefits across a wide area of rural Scotland. Introduced in 2005, it differs markedly from previous schemes, offering a range of social, economic and environmental measures. This broadened the type of support provided in Scotland under the SRDP, including animal health and welfare measures which had never been used before in Europe.

The design of the scheme is novel: non-competitive; no approval process; standard prescriptions with no tailoring at farm level; and all farmers can participate within the limit of an individual allowance. The design is geared towards achieving high levels of uptake throughout Scotland. Participation by land managers is voluntary, as is the selection of measures. Consideration was given to some form of direction to achieve a spread of economic, social and environmental benefits although, to give land managers maximum flexibility, this type of directed approach has not been adopted to date.

Evidence from the first year of applications under LMCMS is that the funding is skewed heavily towards measures aimed at improving access. This suggests that there may be a requirement to limit approvals on any one measure to a fixed percentage of the total funding, in order to ensure that a more balanced spread of measures is provided than would otherwise be the case.

The funding commitments made under the LMC Menu Scheme are shown in Table 3.12 below.

A large share of the funding within the agri-environment/animal health and welfare category is committed to the animal health and welfare management programme, management of linear features (ditches) and management of rush pasture, which together, account for 38% of total funding. The commitment for other categories is much lower: for example, the commitment for the biodiversity cropping on in-bye and the biodiversity cropping on in-bye premium amounts to less than 1% of total funding. This indicates that farmers have focused on measures that they consider more likely to give economic return by improving technical efficiency (animal health & welfare measures) and on those that they may have put into place anyway (management of linear features). Less weight is given to those areas in which farmers tend to invest less, such as biodiversity.

A similar trend is followed in relation to measures aimed at the development and adaptation of rural areas: 36.5% of total funding was committed to maintenance of access whereas only 0.32% was committed to improvement of access by bridges and culverts. One would also have expected a higher financial commitment in stiles and other aspects of improving access. This apparent imbalance will have to be kept under review if we are to achieve value for money and additional outcomes.

Table 3.12 LMC Menu Scheme 2005 commitments (€)

Measure Category and Individual Measure

Committed Expenditure
(€)

% of total committed
expenditure

Agri-environment + AHW

Animal health and welfare management programme ( AHW)

3,783,074

14.1

Management of linear features (ditches) ( DIT)

3,508,575

13.0

Management of rush pasture ( MRP)

3,075,718

11.4

Retention of winter stubbles ( RWS)

996,273

3.7

Management of linear features (dykes) ( DYK)

813,413

3.0

Buffer areas ( BUF)

365,541

1.4

Nutrient management ( NUM)

278,672

1.0

Management of moorland grazing ( MMG)

277,277

1.0

Summer cattle grazing ( SCG)

259,081

1.0

Wild bird seed mixture ( WBS)

243,182

0.9

Farm woodland management ( FWM)

124,271

0.5

Management of linear features (hedgerows) ( HED)

67,648

0.3

Biodiversity cropping on in-bye ( BCN)

6,052

0.1

Biodiversity cropping on in-bye (premium) ( BCP)

4,142

0.1

Sub-total

13,802,919

51.3

Development and Adaptation of Rural Areas (access etc.):

Improving access: maintenance ( IAP)

9,819,906

36.5

Farm and woodland visits ( FVT)

224,900

0.8

Improving access: signposts ( IACP)

209,954

0.8

Improving access: gates ( IACG)

102,742

0.4

Woodland plan ( WPN)

76,692

0.3

Off-farm talks ( OFT)

73,796

0.3

Improving access: way markers ( IACW)

45,858

0.2

Improving access: stile ( IACS)

37,264

0.1

Improving access: bridge ( IACB)

17,413

0.1

Improving access: culvert ( IACC)

16,316

0.1

Sub-total

10,624,839

39.5

Food quality:

Membership of quality assurance schemes ( QAS)

1,280,040

4.8

Training:

Training ( TRA)

1,181,676

4.4

Total

26,889,474

100

Source: Scottish Executive

It is too early to evaluate the full impacts of the LMCMS. Nevertheless, its introduction has broadened the scope of rural development support in Scotland. Analysis of the take up of measures within the menu scheme shows that there uptake of some measures is high although there is an uneven take up of measures in the programme.

For the 2007-13 programming period, the term 'Rural Development Contracts' ( RDCs) will replace Land Management Contracts, in recognition of the broad range of rural development activities that will be supported.

Processing and Marketing Grant Scheme

The Processing and Marketing Grant Scheme ( PMGS) provided financial assistance to businesses in Scotland that process or market primary agricultural produce. Assistance was available toward the capital costs of projects: the construction of new buildings, the conversion of existing buildings and the purchase of equipment specifically for added value processing. Assistance was also available for a range of non-capital projects. The element of PMGS delivered in the Highlands and Islands was co-funded by EU Structural Funds. The lowland agriculture element of PMGS was funded wholly by the Scottish Executive as a State Aid. Evaluation of the Lowland Scotland Scheme in 2004 found that 74% of awards from 2001-04 were made to companies based in rural areas. Approval was given for 82 capital projects and 8 non-capital projects. Grants totalled €19.1 million, of which €18.8 million was for capital and €0.3 million non-capital. From the research, it was estimated that the funding resulted in directly attributable sales increases of €75.6 million, with the potential for a further €46.4 million increase in sales over the longer term. In terms of employment, some 536 full time equivalent jobs have been generated, with a further 241 full time equivalent positions likely to be introduced over the longer term.

Overall, the evaluation of the Processing and Marketing Grants Scheme found that it delivered significant economic benefits in terms of jobs, and increases in value added sales. The evaluation concluded that most of the projects would not have gone ahead without the grant, thereby demonstrating additionality from the scheme.

Farm/Agricultural Business Development Schemes

Two schemes were operated by the Scottish Executive under this heading in the 2000-06 programming period with a total spend of €22.6m. These were:

  • the Agricultural Business Development Schemes ( ABDS) - €4.1m in 2004 covering the Highlands and Islands Special Transitional Programme area; and,
  • the Farm Business Development Scheme ( FBDS) - €3.4m in 2004 covering the rest of the highland and lowland Scotland.

The balance of €0.07m was for the Farm and Conservation Grant Scheme ( FCGS) which, though closed, had a contingency to cover projects as they came to an end.

The schemes supported farm business restructuring or diversification activities. The FBDS provided grants of up to €43,800 per eligible business covering up to 50% of eligible project costs (40% for investments in holdings outside the Less Favoured Areas). The ABDS provided funding of up to €58,400 per eligible business, as well as funding for business planning and training activities. Again, grant rates were variable and were set by Project Assessment Committees. The total allocation to this scheme for the 2000-06 programming period was €76m. The scheme was administered locally through six local project officers and five Project Assessment Committees.

A review of the FBDS in 2002 found that the objectives of the scheme were being achieved to the extent that a substantial number of farm families were being given the opportunity to enhance their incomes but it was too early to have evidence of these benefits. Furthermore, there was limited information recorded on output data.

3.4.3 Supplementary measures associated with the 2000-06 Programme

Table 3.13 below provides a summary 'snap-shot' of the full range of funding for rural development in Scotland in 2004 (and the types of beneficiary). The calculations are made on different bases and, therefore, the figures should be treated as indicative only. From the funds identified, it can be seen that the Programme accounted for 14% of funds, about 52% of this being attributed to LFASS payments. These figures excluded the LMC menu scheme, which was introduced subsequently in 2005, and which increased the significance of the programme to around 16% of total funds. The Natural Care programme, introduced by Scottish Natural Heritage during the programming period, is included and is directed specifically at SSSIs and Natura 2000 sites. Annual expenditure on Natural Care has risen significantly from €6 million in 2004/05 to planned expenditure of €7.7 in 2007/08. A significant proportion of funding is aimed at rural economic and business development and tends not to be directed towards farmers or land managers. However, there is an increasing recognition in the enterprise network supported by Scottish Enterprise and Highlands and Islands Enterprise of the need to support economic development in farming.

The 2000-06 Programme forms part of a wider suite of schemes that provide financial support to rural areas. The majority of rural development support has been provided to land managers, but these other schemes have a wider range of beneficiaries. The Scottish Executive has a clear desire to incorporate a wide range of rural funding mechanisms under the 2007-13 SRDP to create an integrated package of support that will meet EU objectives and national strategic objectives. There is plenty of scope to do this given the large number of land-based rural development schemes in existence.

Table 3.13 Summary of financial significance of different identified rural funding sources

Fund

Indicative amount in 2004 in rural areas (€m)

Type of beneficiary

Percentage of identified funds

SRDP (including state aided measures but excluding LMC Menu Scheme)

166.4

Land managers
Rural businesses ( PMG)

14%

Pillar I subsidies

622.0

Farmers

53%

EU Structural Funds

59.9 12

Rural businesses

5%

LEADER+ (based on average 2000-06)

3.6

Rural communities

0.3%

Other Scottish Executive funds

RSA (based on average of 3 years)

4.4

Rural businesses

0.4%

MDS

0.7

Rural businesses

0.5%

Crofting development schemes

7.3

Crofters

0.6%

SNH Natural Care

1.5 13

Land managers

0.1%

Scottish Enterprise allocation to rural and partly rural LECs 14

146.0

Rural businesses

12%

Highlands and Islands Enterprise:

166.4 15

Rural businesses

14%

Total rural funds identified

1178.2

Source: DTZ Pieda Consulting

3.5 Key lessons learned from the 2000-06 programming period

Key lessons from evaluations of the 2000-06 SRDP and the supplementary measures operated in this period are summarised below.

  • The 2000-06 SRDP was a relatively small part of the total identified public funding going into rural areas and consideration of complementarity with other schemes is important.
  • The beneficiaries of the 2000-06 Programme were predominantly land managers.
  • Integration of schemes will bring opportunities to deliver complementary outcomes in a joined-up way, and to increase value for money in the delivery of schemes, for example, through simplifying application processes.
  • SRDP schemes and measures require clear specification of objectives and desired outcomes, and clear rationales based upon market failure. This tends to be relatively straightforward where economic issues are concerned. However, the complexity of the SRDP in relation to economic, environmental and social objectives means that rationales are more complex.
  • Greater attention needs to be paid to collecting data for monitoring and evaluation purposes so that value for money and additionality can be assessed.