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

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5.3.1.1.2 Setting up of young farmers

SETTING UP OF YOUNG FARMERS (Rural Priorities)

Article 20(a)(ii)

Measure code (112)

Rationale for intervention

As in other parts of the United Kingdom and other Member States, the average age of farmers in Scotland has increased steadily over the years, to a current level of 56 - 58 years of age. Farmers nearing retirement age often have no obvious successor and young farmers find it very difficult to raise the capital required to acquire a farming business. This has a serious negative impact on the development of the industry and its ability to respond to the changing economic environment in which farmers have to become more flexible and entrepreneurial. Over the last few years there have been a number of initiatives to help and encourage new entrants to farming, for example, changes to farm tenancy laws; business skills development initiatives for young farmers; access to business development grants.

A further difficulty for young farmers, however, is that having secured a farm business, they often lack the capital to develop it in the crucial early stages, thus either dissuading them from acquiring the business in the first place or increasing the risk of business failure.

Objectives of the measure

This measure aims to help young farmers to access, from commercial sources, the additional finance they need to develop their businesses in the critical early stages and to off-set the costs faced when establishing themselves in farming.

Scope and actions

This measure will provide interest rate relief to young farmers who become the head of a farm business for the first time and will also encompass a single premium to eligible applicants of up to 75% of the level of the interest rate relief awarded.

It will be for the farmer to arrange finance through an authorised lending institution (e.g. a bank or building society) and, through this measure, the Scottish Executive will provide to successful applicants grant payments to cover the interest on that finance. This measure will be available to young farmers through Rural Development Contracts.

The finance to be supported by this measure may be used towards the purchase of equipment, machinery or livestock, the construction or development of buildings and infrastructure or the provision of working capital required for the development of the business.

Definition of beneficiaries

Beneficiaries will be adult farmers who, at the time of application, are under 40 years of age, have set up as head of an agricultural business registered on IACS for the first time and have been head of that holding for not more than 12 months. The business must have an agricultural standard labour requirement of at least 0.25 Full Time Equivalent ( FTE).

Definition of 'setting up' used by the Member State/region

When the young farmer becomes, for the first time, the legal sole proprietor, either as tenant or owner/occupier, of an agricultural business; or the majority partner in an agricultural business partnership; or the equal partner in an agricultural business with another young farmer(s).

Summary of the requirements of the business plan, including in cases of investments to comply with existing Community standards within a 36 months grace period, and details on frequency and treatment of reviews of the business plan

The application will have to include a business plan detailing the initial state of the business; the scope and aims of the project, with milestones for development; the investments involved; and any training, advice or other action required. If the applicant does not already hold a suitable agricultural qualification (at least National Vocational Qualification Level 2), the plan will have to include a personal development plan including an objective to achieve an appropriate qualification within 3 years after approval of the grant. The plan will also have to include an objective to have membership of an appropriate Quality Assurance Scheme within 3 years after approval of the grant.

The business plan will be reviewed by the Scottish Executive within 5 years, before the final payment of interest rate relief grant (where the business plan includes an objective to obtain a suitable qualification or membership of a Quality Assurance Scheme, evidence of this will have to be provided before the third payment of this grant is made). The review(s) will compare progress against the business plan and consider any discrepancy. Where the business plan has not been followed or progress is not satisfactory, the Scottish Executive may withhold part or all of the remaining payments and require repayment of part or all of the monies already paid either as interest rate relief or an establishment grant.

Use of the possibility to benefit from the grace period in order to reach the occupational skills and competence requirements

Where the young farmer does not already have the required occupational skills and competences, a period of up to 36 months will be allowed to acquire these and this will be made a condition of the grant.

Use of the possibility to combine different measures through the business plan giving access of the young farmers to these measures

The farmer will be able to access other measures through Rural Development Contracts. The business plan will help provide a basis for access to these other measures, although the farmer will also have to provide any additional information required and the proposal will be considered competitively with other applications. Where appropriate, the beneficiary will also be able to benefit from the higher grant rates allowed to young farmers under measure 121 (Modernisation of Agricultural Holdings).

Amount of support

Support of up to a maximum of €70,000 (that is, up to €40,000 interest rate relief plus an establishment grant equal to 75% of the interest rate relief awarded) will be available to eligible applicants whose businesses have an agricultural standard labour requirement of at least 0.5 FTE..

Businesses with an agricultural standard labour requirement of between 0.25 and under 0.5 FTEmay access support up to a maximum of €42,000 (that is, €24,000 interest rate relief plus an establishment grant equal to 75% of the interest rate relief awarded).

Payment

For the interest rate subsidy, payment will be made annually in arrears over a maximum period of 5 years. The interest rate for which subsidy is payable will be capped at 3.5% above the Bank of England base rate.

The single premium will be payable in one instalment following formal acceptance of the relevant contract offer.

Transition arrangements (including estimated total amount)

Not Applicable

Quantified targets for EU common indicators

Measure Code 112: Setting up of young farmers

Indicator Type

Indicator

Indicative Target

Baseline

Baseline value

B5

  • Age structure in agriculture ( holders <35 years: holders > 55 years)

0.078

B6

  • Labour productivity in agriculture

€64,372

Input

  • Amount of public expenditure (total)

Output

  • Number of assisted young farmers (division according to gender, type of agricultural branch and age category)

150 farmers less than 40 years old

  • Total volume of investment

€43.3m

Result

  • Increase in gross value added in supported holdings (€)

€22.8m

Impact #

  • Economic growth (net value added in Purchasing Power Standards)
  • Labour productivity (€ per FTE)

NA.

# Impact indicators will be estimated based on output and result indicators. For whole programme not just this measure code.