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



1.1 Background & Context

EU Council Directive 75/268 initiated the definition of certain agricultural areas as 'mountainous' or 'less favoured' and therefore entitled to special direct payments to ensure the continuation of farming. This was the first initiative to introduce a specific territorial aspect and was somewhat at odds with the common policy treatment which was intended to exploit comparative economic advantage through spatial differences in soil quality, climate and distance from markets etc.

The stated objective of the LFA policy 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'.

LFA Directive 2328/91 provided a framework for payment of annual compensatory allowances to farmers in designated LFAs which were characterised by;

  • Permanent handicaps (altitude, poor soils, climate and 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.

LFA policy was revised under Agenda 2000 EU Rural Development Regulation 1257/99 ( RDR) Articles (13-21) and the objectives updated:

  • to ensure continued land use and thereby contribute to the maintenance of a viable rural community;
  • to maintain the countryside;
  • to maintain and promote sustainable farming systems which take account of environmental protection requirements.

About 3/ 4 of the total land area in the United Kingdom is classed as agricultural, amounting to some 18.5 million hectares, of which approximately 1/ 3 lies in Scotland. However, the capability of Scottish farming is severely limited by climate, topography and soils, with the result that only about 11% of farmland is cropped compared to 46% in England. Scottish agriculture is therefore dominated by grassland, but even this is of low quality with about 3/ 4 (almost 4 million hectares) being categorized as rough grazing (Figure 1.1). Indeed 70% of all rough grazing in the UK can be found in Scotland.

These permanent disadvantages are officially recognized to the extent that almost 86% of agricultural land (and 68% of agricultural holdings) has Less Favoured Areas status, and of this, 98% is classified as Severely Disadvantaged ( SDA) with the balance being classed as Disadvantaged ( DA) (Figure 1.2).

Figure1.1 Agricultural land use in the UK

Figure1.1 Agricultural land use in the UK

Source: SEERAD (2004) 1

Figure 1.2 Less Favoured Areas in Scotland

Figure 1.2 Less Favoured Areas in Scotland

Source: SEERAD (2005)2

Much of the LFA land in Scotland is widely recognised to be of high nature value, as well as boasting a wealth of diverse scenic beauty, both of which are important for the Scottish tourist industry.

The Less Favoured Areas Support Scheme ( LFASS) is now part of the Scottish Rural Development Programme ( SRDP). The present scheme superseded the Hill Livestock Compensatory Allowance Scheme ( HLCA) and is expected to continue to run in its present format till the end of this SRDP in 2006. It has been essentially a compensatory scheme to offset permanent disadvantages in production due to geographic and climatic conditions.

To comply with EC Regulations, LFASS converted from the previous headage-based scheme which used Disadvantaged and Severely Disadvantaged Area ( DA and SDA) classifications to an area-based scheme initially using three farm type classifications (Moorland, Northern Upland and Southern Upland) in 2001 and 2002, and subsequently from 2003 onwards into a new classification scheme where payments per eligible forage hectare were determined by a multiple classification approach using Grazing Categories (4 levels based on stocking densities based on 2001), Mix of Livestock Maintained (3 levels based on the percentages of cattle in the total Livestock Unit calculation) and Parish Fragility Markers (3 levels; Standard, Fragile and Very Fragile). Applications were made via the Area Aid Application ( AAA) Base Form.

Through the availability to farmers and land owners in Scotland, LFASS has made an important financial contribution to rural economies accounting as it has for between 9-12% of total agricultural support since 2000 ( DTZ, 2003 3,SEERAD, 2005a 4 and SEERAD 2005b 5).

At just under 13 thousand, LFASS has more recipients than any other rural support scheme in Scotland (Table 1.1).

Table 1. 1: Beneficiaries of the main Scottish support schemes (2004)










Recipients ('000)










As % of total recipients










Table 1 construction notes:
The total column refers to the total number of businesses in receipt of benefits from one or more than one of the schemes.

Source: SEERAD (2005a) 4

The SRDP Mid-term Evaluation (2003) 6 has previously indicated the important role that LFASS played 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."

LFASS is also the dominant scheme within the SRDP, distributing around two-thirds of the total spend (63.5% in 2004, SEERAD (2005) 7 although this proportion has been gradually diminishing over time.