Agriculture Reform Implementation Oversight Board minutes: 15 November 2024

Attendees and apologies

Cabinet Secretary for Rural Affairs, Land Reform and Islands, Mairi Gougeon ( Co-Chair)

Martin Kennedy (Co-Chair)

Items and actions

Welcome and previous minutes: Agenda Item 1

Chair welcomed members to the eleventh in-person meeting of the Board, noting apologies. Ahead of opening the floor before the first substantive item, Chair confirmed the amicable resignations of Adele Jones, Vicki Nash and Mark Reed – noting their contributions to the work of the Board and that potential replacements will be considered in time. In addition, Chair confirmed that while Martin Kennedy will be stepping down as NFU Scotland President in the new year, he will remain as co-chair of the ARIOB, thanking him for his efforts so far and for agreeing to carry on in the role.

Comments from members

• in relation to the minutes, with regard to the land reform section, it should be clarified that this session was an information update rather than a consultation
• chair agreed and the September note be revised accordingly
• in terms of the action taken from the same meeting that rather than the establishment of a crofting working group, a potential one day workshop between officials and stakeholders (Scottish Crofting Federation, NFU Scotland) with practical knowledge to work through the tiered structure to discuss crofting issues that relate.
• Chair agreed with this approach and a new action was taken
• in the Whole Farm Plan (WFP) update, there was some discussion on usability of the NatureScot biodiversity app and its linkages, but officials confirmed that using the app will meet the requirements of the WFP
• there was concern over the potential increase in number of audits (and increasing paperwork) required as part of the WFP. However, reassurance was provided that the only increase is what has been discussed previously – progression from 2 audits in 2025 to 5 by 2028
• the latest Statutory Instrument (SI) doesn’t include a provision on WFP but Chair confirmed this would be part of a separate SI
• In response to a question on WFP as a service, officials said this will be a fundamental part of the system that drives activity. What do farmers need and what do they have to provide. While it will be light touch in terms of verification, evidence will still be required on inspection
• Finally, an action was taken to amend the workplan to include the Academic Advisory Panel (AAP) response on Integrated Pest Management, regionalisation and activity as a substantive item at the Board’s Q1 2025 meeting, with monitoring and evaluation as a written update

 

Possible operational futures - what will future delivery look like? (incl. regions): Agenda Item 2

Officials presented members with three potential 3 options for a future operating model but noted that they were not stand-alone and could be used to create a hybrid for Scottish agriculture. The previous system was designed to deliver the Common Agricultural Policy (CAP) and that is all it can deliver effectively. Officials made clear that the item was about the long-term operational vision, not the transition.

The Agricultural Reform Programme’s (ARP) Target Operating Model (TOM) will be an operational blueprint to deliver on the Vision for Agriculture. This includes supporting customers who use the future services and what capabilities (people, processes & technology) the ARP will need to have in place. This will be a truly holistic approach, so no piecemeal changes due to working with legacy systems. There has been a lot of qualitative and quantitative research to better understand the current system. Current service families have been grouped given the many dependencies and officials are keen to understand the crossovers. The new system must be flexible to changing demands, allowing active choice about what requires investment.

The service model will shape how Government delivers for users to reduce duplication and make better use of resources (including what can be repurposed), designed with user needs in mind. In its creation, there must be an awareness of the wide range of customers, from those who can self-serve and others who may require specialist support. The four tier framework means that any model must have the capability to:

• provide an entry-level payment for agricultural activity, meeting minimum standards
• allow recipients of Base funding to be supplemented for delivering for nature and climate – ideally in a way that considers food production and fairness
• provide some form of targeted elective support that could be applied for in some way
• improve skills, support professional development and provide advice

The ARP will define a “North Star” to form a business case over the next 2 years as we move towards long-term transformation. This will include testing and prototyping with feedback from key stakeholders.

The regions approach is key consideration in all of this. What is important about them? Do we need to keep them as they are? What would we change for the better? Experiences of farming land will change through climate change and that’s where the flexibility point is important.

Moving onto the three options as mentioned earlier, it is not a case of picking one, but to consider the advantages and disadvantages of each from a farming and crofting perspective. The aforementioned business case will develop over the next 2-3 months to collate a longlist of options to hopefully emerge with a proposed hybrid model.

•  A conditions-based model most reflects the current system with set eligibility criteria to qualify for funding and not linked to specific action or actions. This is well understood amongst industry with simple verification. However, it provides limited choice and is one size fits all approach.
• It is difficult to link to results, with varying payment rate not cost effective in terms of outcomes
• An actions-based model is based on actions with a payment tied specifically, similar to the Agri-Environment Climate Scheme (AECS), with a menu of different actions and payments rate. This model provides a little more choice but is a set of Government-mandated actions with potentially higher delivery costs and variations
• An outcomes-based model is based on linking funding to what is trying to be achieved. There are levels to payments, rewarding those who go further in attempting to achieve those outcomes, similar to NatureScot’s Piloting an Outcome Based Approach in Scotland (POBAS). It might work better for some ARP outcomes than others. Feedback from equivalent pilots in England and Republic of Ireland (RoI) suggest agency for farmers and crofters to deliver best for their land. It encourages innovation and people can monitor improvements with their own eyes. However, the outcomes need to be measured and this can be difficult. Technology has developed sufficiently to help users understanding baselines and to self-report. Timing can be an issue with this model, with often a lag between the action and outcome (often with significant up-front costs). External factors such as weather events are also risks.

Comments from members

• members welcomed this work, particularly the opportunity to look at the long-term agenda, with some noting that this had been the direction of travel before constraints had become clear
• chair agreed that the budgetary situation reined back the original ambition, largely through single year allocations
• on a similar note, there was frustration that the farmer-led groups had already provided a roadmap, specifically on outcomes-based models
• there was general agreement that a combination of the models was the most pragmatic approach. There is merit in marrying actions and outcomes, but monitoring and evaluation and user support needs to be sufficient (Republic of Ireland has significant technical support behind their outcomes-based model)
• in response to a query on external consultation, particularly the need to do so with younger people, officials confirmed that external user research has taken place and will continue to do so, including with nearly 4000 farmers and crofters to move away from assumptions, co-designing with people in mind
• data security was raised as an issue, the need for assurances that the system is safe from cyber threats
• there is a separate programme to make compliant under the current system
• in discussing the spending of public money, wider considerations are required than with simply the direct beneficiaries of it. One member made the point that the public - rather than the direct recipients of support - should be seen as the customer for the spending of public money. In response, officials agreed that there was more than one view and that not everything will be designed at the request of users, but an attempt to baseline their existing experience
• there is also policy intent and political direction that will drive the direction of this work
• members liked the personas, with officials mentioning that there is a huge amount of background data behind them which has drawn out key themes to create generalisations
• the 5 personas broadly cover 80% of user base. Chair asked for officials to provide a written update to the Board with more information on the personas and an action was taken
• regions were agreed to be fundamental and their configuration must be done carefully
• farmers and crofters have a deep understanding of it, so it should be used as a baseline to aid transition to the future delivery mechanism
• one member commented that regions remain a construct based on CAP where the system doesn’t allocate funding to where outcomes are best delivered – that would need to be addressed in any revision to the current structure
• the additional, up-front costs worried some members. Farmers and crofters will carry out basic cost-benefit analysis (income foregone and additional costs)
• without the incentive to override those concerns it could prove problematic. Any hybrid approach, it was argued, should have a safety net in mind.
• one member raised the issue of farmers in England opting out of schemes because they are not financially viable
• this, in turn, means that government has fewer levers to deliver outcomes
• there will inevitably be risk factors but the supply chain will drive some of this (and make elements mandatory), but we must ensure that any market-driven data can be transferrable for governmental requirements
• there is perhaps a misunderstanding about conditionality
• it is not a payment for meeting conditions, it’s more a sanction for non-compliance. Officials pointed out that in any system, we need to make sure that farmers who are doing everything they can are not unfairly penalised
• the idea of the farmer or crofter having intended outcomes and given licence to create their own pathway, fit for their land, could be really empowering
• an ideal scenario was outlined that each farmer would look at their own farm with their advisor to create a plan of action
• this would be supported by a combination for payment on actions and outcomes, acknowledging that events may be outwith your own control
• on the issue of risk, it was hoped that you could monitor regional patterns and could change delivery based on the locale and learn best practice from land managers Everyone agreed that data capture at a regional and national level would be required to make this successful
• on conditions-based, it was argued that it is important to think about what impact that money is already having, particularly in rural communities, that is hard to capture but is happening
• measuring outcomes in situations like that would be helpful as the benefit of some small businesses is that they’re there (in rural/remote locations)
• although UK agricultural support is World Trade Organisation (WTO) compliant, this alone does not automatically mean an explicit focus is given to the wider/social value of that support; direct payments, including those which are decoupled from production levels/prices, fall under the WTO’s ‘Green Box’ classification, meaning that they are not capped, as well as Voluntary Coupled Support (VCS) being exempt from a WTO cap
• AECS in its current form doesn’t allow for crofter-led change and despite the lack of outcomes, payment is received regardless
• outcomes-based would reward workarounds which achieve outcomes. There was a view that AECS could be used as a template but that differing grazing plans should be encouraged with a move towards an actions-based model tailored to outcomes
• a move away from the Basic Payment Scheme towards something closer to the rural priorities approach where there were a list of regionally specific options
• alternatively, blanket bog, moorland management – achieving outcomes is very difficult and can often take a decade or more to bear fruit so attaching a payment would be a non-starter
• this is where farmers and crofters need the agency to decide on the best route forward for their particular holding
• there was a warning not to miss the ultimate goal of improve biodiversity, addressing climate changes and high quality food production by focussing too heavily on the mechanism
• tenant farmers were raised as being in difficult positions, particularly with regard to the wishes of the land owners and potential differing approaches of neighbouring farms
• land abandonment is a very real risk if conditions are too onerous
• the system need to build-in capacity for some long-term outcomes
• capital support will be required to deliver any transformative change
• tier 3 is the most appropriate vehicle for this but there was concern over this having the appropriate budget
• there are swathes of farmers and crofters who are hard to reach, don’t plan or use consultants
• some sort of individual contract with government, although hugely resource intensive, could be revolutionary
• there was a response that this is an aspiration of the Whole Farm Plan working group, to create a decision-making tool to manage individual units effectively
• whatever decisions are taken, there is a big communications push required to ensure this is seen by the sector as an enabler rather than an imposition
• could there be scope for piloting an outcomes-based model in places in Scotland where it might be more of a struggle – providing additional support and advice to establish whether that makes a difference in achieving outcomes
• another member argued this would be difficult when scaling up to 18,000 claimants
• co-chair warned against unintended consequences of doing too much, too quickly.
• any model which provides the farmer or crofter with more agency to use their own knowledge and experience should be a starting point, with a mixture of conditions-based and action-based elements given the factors outwith the control

Officials thanked members for their robust and helpful feedback, confirming that the next stage of the process will be the creation of a long list of options, scored by relative importance and cost (on both sides) being a fundamental consideration. This will then be presented to the Cabinet Secretary and the ARIOB with a view to whittling down a shortlist.

 

Further discussion on options for grassland and HNV: Agenda Item 3:

At previous meetings, the Board had acknowledged the benefits provided by permanent grassland and that these will contribute towards the success of the Enhanced tier. There is an understanding that improved grassland management will deliver towards the policy commitment to improve biodiversity and climate change mitigation.

Officials provided a short refresh on grassland approaches, working within the current system by way of a transitional approach and linking the measures to the monitoring and evaluation framework previously shared and discussed.

Comments from members

• there needs to be care in terms of inputs when you take into account productive grassland being reseeded, so perhaps a threshold should be considered
• attention to detail is critical and one member said that while officials discussed “creating low impact grassland”, this also needs to be maintained
• in addition, while costs might be reduced, could this see income reduced too and conflict with efficiency measures?
• on the subject of grassland regionalisation, officials are hoping that all grassland farmers can contribute through Tier 2, regardless of regional classification, and won’t be mandating unachievable expectations across the country given the differences across Scotland
• rough grazing needs to be brought into the fold, especially as it interacts with birds, wider biodiversity benefits and indeed the entire farming operation
• we need to ensure habitats are continuing to maintain grazing birds
• any further documentation or plans (and additional burden) for this was argued to be unnecessary – having one universal plan makes sense
• members were united in the need to clarify the regions position as soon as possible. If this is to be based on regionalisation, it lends itself to regions 2 and 3 being combined
• in terms of a potential High Nature Value (HNV) working group, it could begin by looking at how to best manage Region 1 permanent grassland with Region 2 or 3 rough grazings within the Enhanced tier
• permanent grass (PGRS) Region 1 ideas could be developed further for Enhanced requirements
• less than 4000 businesses are within EF so we must ensure that there are more businesses completing the necessary actions to justify the amount of funding allocated to Enhanced
• it was noted that temporary grassland is still to be properly accounted for. If we focus on temporary grass (TGRS) and PGRS in Region 1 carrying out activities for greening then this would mean all of Region 1 contributing in some fashion
• the member who proposed the group at the meeting of the Board in September suggested that for the purposes of this discussion, it is not about what HNV actions might be suggested, but whether it would be a good idea for a working group to come back with recommendations to the ARIOB. As was said previously, Enhanced greening will apply to the minority of Scotland’s land and so the working group could consider what could be done that would be simple to administer, easily verifiable and which would bring people into process of change who aren’t yet – i.e. addressing inequity
• in terms of timescales, the member suggested any proposals would commence from 2026 at the earliest, recognising that many are already doing this so effectively providing a baseline for what you can do for climate and nature
• another suggested it could be framed around what can be achieved within current constraints – there will be some businesses that will be exempt, but people must understand the logic
• there is the threshold at the moment, but it is likely that you will have to do something at some stage
• a point was made that HNV options for Enhanced can’t be split from a replacement for the Less Favoured Area Support Scheme (LFASS), they are very likely going to have to be conjoined – especially as the Route Map states that LFASS will be incorporated into Tier 2
• others wanted to avoid the initial complication of dealing with LFASS immediately, proposing to discuss the fundamentals first, then LFASS at a later stage of the group
• chair asked members for agreement on the working group and there were no objections
• chair also confirmed that there would be official support for it and requested that volunteers express interest via the ARIOB Secretariat
• the working group’s Secretariat function will be provided by NatureScot and relevant SG officials will attend to provide additional support and necessary ARP context

SRUC 3  Islands Report: Agenda Item 4

Following discussion at the Q2 (May) meeting of the ARIOB, Rural and Agricultural Development: Maximising the potential in the islands of Orkney, Shetland and Outer Hebrides was published in July and a copy was sent to members shortly after.

Scotland's Rural College (SRUC) representatives provided an overview of the report, which looked at the impact of reforms of the aforementioned island groupings. The team were to identify and quantify risks and opportunities associated with policy change for farms and crofts, and associated upstream and downstream sectors, local communities, local cultural heritage and the natural environment. The report provides a template to establish baseline evidence on environment, social, economic and support for agriculture across other regions.

In terms of key messages:

• significant decline in real-time budget with disproportionate compliance costs for the smallest recipients in addition to supply chain costs
• complex set of policy goals need to be acknowledged such as food supply, cultural heritage, communities, economies and supply chains
• support has declined in real terms in many areas yet increased climate and nature conditions are being sought
• crofting culture – the dominant structures in terms of common grazings and with real challenges
• long history of population (and livestock) decline and the resulting societal problems
• agriculture is embedded but some areas are at a critical point, Western Isles in particular in relation to grazing
• messaging in relation to forthcoming changes is confusing with many concerned over the future of LFASS, especially those not in receipt of the basic payment
• island Communities Impact Assessments (ICIA) deserve a greater focus in policy development to better understand the islands

The SRUC representative said that the voluntary smallholders scheme has merit, as does potential voluntary, redistributive support for greater equity (Frontloading) and some members felt this warrants a bigger, more urgent, conversation about how it might work in practice, especially as it is an established funding mechanism in Wales. In addition, they believe that due to the perceived confusion and complexities of the likes of the WFP and calving interval changes, there is a very real danger of people walking away from the sector completely.

Comments from members

• chair thanked the speakers, saying it was incredibly valuable to get this level of detail about the challenges faced by the island communities
• members were also grateful, welcoming this work and pondering as to whether it could be extrapolated to wider rural Scotland, or at the very least be used to decide on intervention to address problems and delivery mechanisms (including informing next steps on LFASS)
• this report highlights the scale of (small) payments to many businesses and if conditions continue to increase it will lead to more people leaving the sector. Government must consider the impact on small businesses, remote demographics and the supply chain of future agricultural policy and this report is the basis to better help farmers and crofters living and working on the islands
• officials mentioned the small producer scheme work ongoing as part of Base (Tier 1), looking at the collective needs of small producers and the ecosystem around them (including private abattoirs)
• there is reason for optimism - sheep numbers are starting to stabilise and there is anecdotal evidence that more young people are taking an interest in the industry, with waiting lists for crofts cited
• the needs of island communities are unique and there should be a coherent policy, with the requisite structural support, within the Rural Support Plan
• social and community aspects can’t be forgotten
• discussion turned to regions, with members generally feeling that it had ended inconclusively at the last meeting in September
• there was also a general view that the topic needs to be prioritised and discussed in the way that agenda item 2 was today. Officials interjected that the regions discussion would be part of that future operational model work, particularly at the next stage of development (the aforementioned longlist of options) and that this would be brought to members at the Q1 2025 meeting (subject to agreement from the Cabinet Secretary)
• officials also reminded members that it would be best not to take any concrete decisions relating to regions now, less wed ourselves to the current system
• co-chair asked if the AAP could help with modelling so as not to overly burden the ARP
• officials replied that the SG has put capacity in place through the James Hutton Institute to build an accessible tool and that we are in a good place with regard to research
• chair said that this morning’s agenda item (2) was critical to the weaving together of the different strands of work and agreed with a member request that regionalisation should be included within Q1 of the 2025 workplan and this is reflected as part of a previous action

 

AAP response to ARIOB on soil carbon and Natural Capital Markets: Agenda Item 5

Finally, Chair welcomed a representative from the AAP to summarise the current knowledge on soil carbon and Natural Capital Markets.

In the context of Scotland’s Net Zero by 2045 commitment, the land sector can not only reduce emissions but increase carbon storage. Carbon insetting takes place when businesses invest in carbon reduction projects within their own supply-chain. Carbon offsetting allows businesses to invest in projects outwith their supply-chain (paying someone to reduce emissions elsewhere).

The economics support both approaches but there are practical challenges including technical, financial and market related obstacles. The Natural Capital Carbon Market framework has key objectives around setting standards, ensuring integrity, and aligning efforts nationally and internationally. Businesses must guarantee the permanence and additionality of carbon storage to ensure credibility of their efforts. External investors may access carbon opportunities more easily than farmers and crofters which raises community benefit questions. It is important that there are cohesive strategies across private and public sectors to address these disparities.

Agriculture offers multiple environmental benefits (e.g., carbon sequestration, biodiversity enhancement, water management) and can provide additional income through carbon credits. However agricultural businesses are encouraged to demonstrate their credentials by prioritising insetting over offsetting. This approach not only builds capacity but is increasingly viewed as a “licence to trade” within the supply chain.

Establishing soil carbon baselines is critical to ensuring additionality and creating standardised protocols, which are essential to prevent greenwashing.  However, this process is expensive and time consuming. Soil carbon sequestration potential varies depending on factors such as soil type, geographical location, and its capacity is limited.  

Addressing these challenges is essential for credible emission reduction. Indeed, its long-term success depends on reliable baselines, effective monitoring, transparency, and coordinated strategies between private and public sectors.

Comments from members

• in response to a query on food or farming initiatives, there is the Farm Carbon Code which involves working groups at a UK level. Defra are also included in the Soil Carbon Code
• the respective Peatland and Woodland carbon codes have positioned themselves as integrity, high quality. However, these are UK only and globally the picture is more challenging
• members discussed the uncertainty on this topic leads to inactivity, with the lack of peatland restoration a prime example, especially when private investors will want to see a return
• the Minister raised the implications what the buying and selling of carbon now might mean in the future with regard to potential double funding
• members unified that we must understand the scale of its use in Scotland as a baseline to progress from – data gathering and usage, whether through SG soil carbon testing or Quality Meat Scotland (QMS) baselining project (both given as examples) are essential for this to work.

AOB: Agenda Item 6

Officials referenced the recent UK budget, notably that funding is moving from ring-fenced to block, which means the Scottish Government will determine the allocation to agriculture. Chair thanked members for their contributions and looked forward to the Board’s next meeting on 28 February 2025.