Agriculture Reform Implementation Oversight Board minutes: 26 September 2025

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 introductions: Agenda item 1

Chair welcomed co-chair, the Minister for Agriculture and Connectivity and assembled members to the fourteenth meeting of the ARIOB, noted apologies and asked for any immediate feedback on papers.

Comments from members:

• welcomed the papers from the Academic Advisory Panel (AAP) which would inform later discussions, although there was a point raised around some assumptions made therein
• a tracked changes version of the workplan (highlighting amendments since May) was requested an Action was taken to include within the next meeting pack
• on the Rural Support Plan, the associated paper mentions engagement with stakeholders in September and an update was requested
• officials confirmed there had been some slippage on the timeline but engagement will take place as committed to
• in response to concerns over the ARIOB interim meeting on RSP being after the engagement sessions, Chair and officials reassured that there would still be time to reflect substantive feedback after that meeting (5 November).

High Nature Value (HNV) sub-group update: Agenda item 2

A representative of the working group reminded members of the background to the sub-group, set-up in January, and that their work is looking at how all farms can best deliver for climate and nature without being prescriptive. The project will be split into two phases. The first will examine earlier work on HNV in Scotland, looking at which metrics and criteria are important as well as building on lessons learned from Europe, using the available data to paint a high level picture. The second will drill down into case studies or, in other words, real life farm situations.

Comments from members:

• in response to a query around historic work being taken into account, the representative said that they aim to produce something applicable across Scotland but want to learn from existing work and avoid duplication
• in terms of the future policy direction, could this be a basis for Tier 2? The representative added that farms will need support from a number of funding elements but Tier 2 has a key role to play in delivering for climate and nature
• it is important not to disregard big units that are adopting HNV approaches
• the naming of HNV could be amended to upland systems
• this work must take into account renewable energy and other land uses to avoid looking at HNV in isolation
• translating HNV practices into a payment will be difficult, particularly in mixed systems.

Realising the Vision - Policy Principles of the direct payment mechanism: Agenda item 3

Following May’s direction from members, Officials gave an overview of the related paper which set out core principles of the future direct payment mechanism – putting in one place public positions taken by Scottish Ministers, as well as potential positions not yet taken. The paper does not seek to take decisions on everything, but provide framing for future co-development work with stakeholders. The language will need to be refined, and that was raised by the Agriculture Policy Development Group yesterday (25 September), but this allows us to take the next step.

The paper was drafted in context of ARC Act delivering the Vision for Agriculture, a conceptual outline of how eligibility, activity, Tier 1 and 2 might be defined and understood. The paper also addresses entitlements, in the context of being a historic budget control mechanism, and a preferred approach for small producers in the truest sense, not as an add-on. Finally, officials asked members to keep the next agenda item’s paper (VCS, LFASS, Regions) in mind during talks.

Comments from members

General

• while this may not be the final destination, it is a significant step forward, with an opportunity to set clear foundations in terms of delivering future support
• activity, eligibility and entitlements are interdependent and fundamental to ensure future support can be fully delivered rather than just desired
• we must understand the land we have and what can happen on it to drive outcomes
• we must capture the value and benefit of ineligible features, as the EU is now doing – the definition of eligible land in Europe is now broader and it is not ineligible if the land is being used for environmental benefit
• the EU framework should be assessed to figure out which elements would best suit Scotland
• the messaging on small producers was welcomed, and a reminder offered that small businesses offer more than agricultural output
• common grazings must not fall outwith the support framework
• there was some discussion on land value, noting the huge pressure on land values from multiple sectors
• further to this, the language used and definitions employed are important, since land value and can change given what land use looks like
• officials added that much of the what the future system will look like is tools and technology dependent. Against the Scottish Public Finance Manual, potential efficiencies have to factor into the eventual policy
• the topic of banking involvement was raised, especially to aid new entrants, and the Minister confirmed that banks see this industry as a long-term investment they want to be part of
• it was pointed out by some members that carbon emissions will inevitably be judged against future lending
• one member said it was helpful to see the bigger issues being explored in this forum Government has the task of addressing economic, environmental and social goals with a single blunt instrument and, at the moment, is finding all three challenging
• a member cautioned that the social context in which businesses operate is important to keep in mind, alongside food security and food production
• another member suggested that we can’t look at the impacts of change in isolation; we must give regard to the long-term, holistic, cumulative impact of change on the sector

Activity

• if activity and eligibility are clearly defined and become a budget control mechanism, entitlements could be phased out
• members suggested the definition of agricultural activity should be the starting point; officials suggested the definition of farmer/crofter could come before activity
• members were largely agreed that agricultural activity (sustainable food production) must be at the core, and also agreed with the paper’s statement on a less prescriptive approach being pursued - maximum flexibility to let farmers and crofters do the right thing for their businesses
• co-chair added that the definition of activity is fundamental and will deliver on the outcomes. Land abandonment is on the rise and it is recognised agricultural activity which will keep people in our rural communities
• others disagreed, outlining that setting payments in relation to activity tied to production could potentially exclude many other activities on farm, and we need to think more holistically to construct a support system to achieve the aims of the ARC Act
• there’s jeopardy in setting a position on activity and eligibility because so much money is weighted here, whereas in future we may see benefit in tying Tiers/Schemes to outcomes, i.e. moving money out of Tier 1 to Tiers 3 and 4, and delivering Tier 2 as was originally envisaged
• it was suggested that an area-based assessment would work best if activity is aligned with outcomes, and that this link could be improved
• multifunctional land use should be encouraged to give farmers and crofters opportunity for alternative land use while receiving support
• environmental work won’t take people away, indeed it will require intensive management and create jobs
• how we think about agriculture about it is evolving – recognising that farming is more than food production
• a broader set of activities can deliver greater outcomes, of which food production is still a major part
• banks look at long-term investment security, connected to the resilience of farms and crofts; the definition of activity could therefore affect investment in the sector
• there was agreement that it need not be an “either or” scenario, with the Minister pointing out that a farmer or crofter producing high quality food will look after their land at the same time
• chair added that this is already at the core of what we’re trying to do
• delivering for nature and climate will require more habitats and better management practices to restore, rather than maintain, the aforementioned low baseline
• officials interjected that businesses undertaking agricultural activity on an agriculturally managed holding is fundamental to unlocking payments within Tiers 1 and 2. T1/2 payment- potentially more difficult questions are how much agricultural activity? How much land do we want to set aside for nature?
• hence ineligible features as a starting point for discussions as activity needs to reflect the breadth of the Vision
• how to deal with rough grazing (and management of underlying peatland) remains an issue
• if rough grazing was dealt separately from the current regions system it would potentially make activity simpler, in dealing with a narrower band of acceptable activity
• however, an alternative view was offered that removing rough grazing from the system could break the link and needs careful consideration
• the whole system approach might be the most sensible option
• the Minister highlighted that the industry is wrestling with availability, profit for producers and affordability for customers, which is currently demonstrated when looking at the current prices of beef and lamb

Eligibility

• there was some discussion, but no conclusion, in relation to eligibility of the business against eligibility of the land
• would an area of land that did not see agricultural activity, but was delivering against the outcomes, be eligible?
• care must be taken over definitions and resulting unintended consequences of definitions
• the Board were agreed that, ideally, investment should be focused on the risk taker (those with “dirt under their fingernails”), although that can vary depending on the structure of the business/set-up because the landowner could well be delivering the environmental benefits and providing the tools to do so
• defining an active farmer will be crucial, but will give rise to additional administrative burden to verify, especially if a precise definition, so a balance is needed
• the tenanted sector must be considered, as they do not always have the remit to choose
• the challenge will be setting the bar for delivery against the outcomes, how much ambiguity can we tolerate?
• some eligibility should be at a national scale, and others set a regional/local level, which will add complexity
• acknowledge the differences across Scotland and this will help build trust
• there was a warning against using means testing due to varying results (larger farms not always financially better off), poor messaging to industry and the complexity of administering it
• however, it begs question – what is the necessary underpinning level of support to ensure ongoing capacity to deliver against all five outcomes?
• officials mentioned that in relation to scaling payments, at the moment it is increased by area of land, but the question is whether Government links money to the amount of land being farmed or something else? If so, what would something else be? Officials have tried to set that out in the paper but there is a challenge in articulating that
• ultimately, the internal conclusion is that an area-based system is imperfect (smallest recipients get less) but less imperfect than alternatives
• most members were in agreement on area-based so long as what happens on that land is linked to a particular outcome(s)
• as things stand, it was argued, there is insufficient linkage to those outcomes as long as the bulk of funding is allocated to Tier 1
• the AAP recommended tapering Tier 1 to redistribute to the other tiers - large businesses have efficiencies of scale and can help
• others urged caution over tapering because it would still be tantamount to making decisions over business spending potential and that business may be limited due to a number of factors including existing loans and hire purchases
• such variables would have to be taken into account, particularly around time delays, crop production and weather events
• there was a request for Government to carry out some modelling around redistribution, different thresholds, weightings etc. and an action was taken to look at modelling on degressivity and capping in different scenarios to inform discussion
• large payments are not exclusive to large landowners and can’t make assumptions about what they are delivering, but there should be appropriate verification to determine
• large business, especially in the beef sector, are a hugely important part of the supply chain on which a number of smaller businesses rely
• an opposing view was offered that this should not justify public subsidy under the future support framework

Entitlements

• could active holding(s) or active hectare(s) act as a budget control element?
• many businesses also declare a significant amount of unclaimed land that is utilised for agriculture but without entitlements there’s no payment

Tiers 1 and 2

• the role of the Board is essentially to advise government on how to spend £650m of public support, with discussions on what that support is delivering for what we need in terms of outcomes
• is awarding Tier 1 the bulk of the funding pot helping to do that?
• would welcome a clearer structure of Tiers 1 and 2

• in terms of accepting organic certification for Tier 2, there should be scope to think about other certification ideas dependent on what our aspirations are following on from Enhanced Greening
• we must have flexibility with quality assurance to allow for mutual recognition and avoid duplication of effort for all, especially when, for example, dairy farmers are already producing to high environmental standards as part of the supply chain
• on that note, it was argued quality assurance and a degree of recognition should have specific criteria, open to all and help meaningful delivery, especially as Government drivers are small in comparison to the market
• touching on current funding mechanisms, there was some discussion about LFASS, VCS, SUSSS and other schemes as to where they sit within the Tiers with conflicting views
• in terms of the principles, Tier 2 is delivering primarily for nature and climate and packages of measures will be there to support outcomes, and so coupled support could not be allocated there as currently constituted
• some schemes which currently underpin support for agriculture are poorly linked to climate and nature outcomes and this is where a coherent evolution needs to happen as otherwise Government will not achieve its targets
• clear signals are required from Government that the status quo will not be maintained but equally that businesses will be supported to adapt and adjust
• chair confirmed that the current system will not stay as is and understands frustrations around Tier 2 rollout
• government has done what it can within current system to deliver positive change in the meantime while work takes place in the background to deliver the framework as envisaged
• the splits across tiers will be like that in the interim period but there are mechanisms to adjust this in future depending on what Tiers 1 and 2 deliver

Summary

In response to a request from the membership, officials sought to summarise the wide-ranging discussion:

• eligibility – agreement that the agricultural support budget be used to support agricultural businesses, rewarding the risk-taker
• activity – wide ranging discussion on what it was with agreement that Government should bring in ineligible features and reward for agricultural land not necessarily delivering agricultural output as long as they are a predominantly agricultural business
• are alternative practises to be stopped? Exemptions currently exist, but should they be stopped?
• small producers – agreement on specific approach, but more work required to develop it - size by area or size by value? Needs to be linked to redistributive payments
• tier 2 – Qualifying ticket (like organic)? Significant misgivings but need to be clear about what criteria/rules are and what is being delivered
• further consideration required
• entitlements – discussion but no set position agreed
• means testing vs area-based – agreement on area-based remaining the best option

Officials concluded that advice to Ministers would follow, informed by the helpful discussions with members.

Realising the Vision – direct payment mechanism overview: Agenda item 4

Officials gave a short overview of the related paper, noting that regions, farming in areas of constraint and the voluntary coupled support were interwoven in the previous discussion. The paper provides a summary of the intent of the present, which exists for different purposes, as well as a summary of regions work to date and options explored. The first Rural Support Plan will be amended through the stages of change. Before opening the floor, Chair added that if there are to be changes to the regions that should be determined first, as any change will require time to plan and build and will realistically take a number of years to implement. The Minister also asked member to consider ‘Simplicity and Stability’ of earlier years – how do we make the move to a simple system which helps deliver against the outcomes?

Comments from members:

• one member suggested a constraint-based top-up for Tier 1 to deviate from an LFASS model which itself is based on data from decades ago – redistribution has to be in there
• contractual mindset is key with a need to move away from historic allocations. 18,000 people is not a huge data set so would refrain from as many exemptions as currently
• we are in danger of tweaking direct payments and so need a better design to deliver against the outcomes
• it’s a complex situation and the ‘one size fits all’ approach of 2015 all was never going to work so the architecture is fundamental to making this a success
• while we can aim to make the system simpler, it will never be simple when you have a diverse population which is required to deliver objectives during a period of significant cultural change
• working to annual budgets is always going to be a restraint
• the AAP recommended an amended 3 region model
• as mentioned earlier, this might be an opportunity to change rough grazing and what we mean by that
• compensating for constraint might be considered a strange policy when we should be sending a signal to industry – support for what you can actually do
• lack of data – previous region models not included and therefore members can’t be expected make an informed decision
• farmers and crofters need to know what support they’re getting and what for – clear expectations, which is comprehensible and promotes reinvestment in businesses – support needs to be understandable more than simple, and provide clarity to allow long term goals
• we must be mindful of constraints going forward with regard to IT capabilities and budget restrictions, alongside the timescale in real world terms for businesses
• can we learn lessons from what the rest of the UK have done?
• in response to a question on whether IT will be able to deliver what we need it to, officials replied that assessments will be made from policy design through to delivery implementation to ensure that it can
• climate mitigation is often discussed, but members would like to see climate adaptation given equal footing
• frustration was voiced at the lack of time the Board have had to not only discuss Tiers 3 and 4, but see high level overviews of what they could achieve and what they could offer businesses, what practical delivery looks like
• how can we answer the region model question when we don’t have the basics of the framework set out? Another member mentioned that Tiers 3 and 4 are not on the workplan this side of the Scottish Parliamentary elections and would like to see these brought forward
• in summary, Tier 1 provides underpinning support, Tier 2 is to be the engine room of environmental progress, Tier 3 is a more bespoke way of doing that and Tier 4 cuts across all of those in terms of business efficiency and training
• the paper aims to start figuring out how we allow money to flow through the system, how we might best allocate funding across Scotland’s complex agriculture landscape
• it will be fundamental to incentivise culture change through appropriate, proportional conditions while simultaneously trying to associate right conditions with that
• co-chair raised the potential of Actively Farmed Hectares as a possible solution, a bold change which could see the funding splits flipped and which could focus on activity, see regions made redundant, and act as an incentive to new entrants
• much of this work has already been scoped by the Farmer-led Groups
• on the topic of relationships between Government and industry partners officials added that the current system is based on a compliance model and RPID would like to move to a guidance and support model post-EU exit, a cultural shift from payment agency perceptions
• scenario testing would be very helpful in considering this in the round and another call was made for modelling
• on the topic of LFASS, it was agreed that it is and always has been complex (agri-environment roots rather than socio-economic) and that any future LFASS equivalent scheme, if required, should not try to duplicate base payment scheme, but act as a top-up or rough grazing scheme so long as the purpose for Government intervention is clear
• a warning was offered that while there was agreement on principles, any changes to LFA could distort markets
• this is part of a step change, so any recalibration or fresh baselining will inevitably mean some people have their funding reduced, but that assessment will be based on the current aims of Government rather than from years prior
• both sides were understood – that there has been undoubted overcompensating but many will feel the loss of income if any payments are removed
• there needs to be a realistic timeline for transition – it can’t happen overnight, but we need to have an honest conversation about what it looks like

Summary

In response to another request from the membership, officials sought to summarise the wide-ranging discussion:

• unlike the previous item, there was no universal agreement on any issues as none have straightforward answer
• progress needs to be made, and sooner, but can’t jeopardise the industry
• no clear steer on regions, LFA, VCS but have had a suggestion to explore an AFH approach to link activity to payments
• plea to make things understandable, avoiding unintended consequences (assumptions of peripherality)
• officials have work to do to distil that into advice to Ministers and note the requests for scenario testing / modelling etc. from what has already been done into Scottish Government preferences to bring back to the Board

Chair thanked members for their contributions and looked forward to the Board’s next meeting.