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Future agricultural support should consist of four strands - direct payments, a top-up fund, rural development programme funding and Less Favoured Area (LFA) support.

That was the main thrust of the interim report of the Pack Inquiry into the future of agricultural funding, published today (Thursday).

Detailed consultation on the interim findings will now take place, with a series of meetings planned around the country.

Inquiry chairman Brian Pack said:

"This interim report is very much an Aunt Sally for stakeholders to comment on and bring forth fresh evidence to help shape the final report.

"To inform the final report - scheduled for June 2010 - I will be taking part in extensive public consultations and gathering additional evidence on the various issues flagged up in the report which my committee and I can consider."

The interim report sets out the global, European and Scottish Government perspectives on future agricultural aid schemes and uses this, along with the responses to a successful call for evidence in October 2009, to inform what support beyond 2013 might look like.

It focuses particularly on direct payments and top-up funds with detailed comment on rural development programme funding and LFA support reserved for the final report.

Rural Affairs Secretary Richard Lochhead said:

"The Pack Inquiry is a crucial piece of work which will help shape Scottish agriculture for years to come. The interim report is a well-thought out and well-presented report which sets out some key issues for further consultation and I have no doubt that this report will stimulate fascinating debate on the future of Scottish agricultural support. I'd like to thank the inquiry team for their unstinting commitment and effort to date.

"The volume of evidence presented to the Inquiry team so far is testament to how much importance the agricultural sector attaches to the Inquiry. I am sure that level of interest will not only continue but grow and I'd urge everyone with an interest in the future of farming to have their say during the detailed consultation phase.

"I look forward to receiving the final report in the summer and will set out the Government's full response once we have digested the Inquiry's final recommendations."

DIRECT PAYMENTS

The report argues for the need for direct support to agriculture to ensure a viable production industry that can meet the many demands on it. On the basis of the evidence received, the Inquiry examines an area base for direct payments but flags up the considerable financial redistribution between farms of the same type and between regions that would be needed under a move from historic to area-based payments. It identifies that the more intensive livestock farms will be hardest hit.

The Inquiry will commission more work on this issue and will benefit from the consultation.

TOP-UP FUND

The concept of a top-up fund financed directly by money from the direct payment budget is new and, if Scotland wished to adopt it, would need to be argued for in the CAP reform negotiations. The fund would be used as the basis for an outcome-based contract between producers and Scottish society - the aim of which is to achieve transformational change to increase farming's efficiency and sustainability.

The proposed fund might, depending on feedback from the consultation process, be divided between producers in proportion to their direct area payment or, possibly, use some of the money for sectoral specific schemes - the successors to Article 68.

The Inquiry recommends that, to be effective, the top-up fund would need to be about 50 per cent of the amount paid out as a direct area payment but, again, the consultation will gather views.

The report provides an illustration of an area-based scheme, not to suggest that it is the way forward but to provide a context for the consultation on the types of decision that will need to be made and an example of the relative area payments.

OTHER ISSUES

For the shorter term, the report recommends that no change to the current Single Farm Payment (SFP) system is made until at least a year after the post-2013 CAP regime is known - it is considered very important that robust administration systems are developed before any change is made. The report recognises that a number of producers have been severely disadvantaged by the historic SFP system - particularly new entrants - and, therefore, suggests that the change to a new system should be completed in one step but, again, the results of the consultation will advise the final recommendation.

The report identifies that no methods of providing new entrants with entitlements under the CAP Health Check regulations exist.

The Inquiry also examined what regulations might exist to prevent entitlement holders activating them on land with no agricultural output. The only identified method was introducing a minimum stocking rate - 0.08 Livestock Units per hectare - under Good Agricultural and Environmental Condition (GAEC) but this was identified as fairly bureaucratic and, again, seeks the views of stakeholders on changing GAEC.

The Inquiry was charged to consider the reduction in breeding cows and ewes and suggests that the only short term way to try to impact on this is the use of Article 68. The report includes three possible beef measures: coupled cow subsidy for up to 40 breeding cows on LFA; eradication of Bovine Viral Diarrhoea; and extension of the beef calf scheme to cover all calves sired by a beef bull. A sheep measure to try to halt, and even reverse, the loss of ewes in the north-west with a lamb headage payment is outlined. The four Article 68 measures and the possible conversion of the Scottish Beef Calf Scheme Article 69 to Article 68 are offered for consultation and further analysis before firm recommendations are made.

Public consultation meetings will be held as follows:

January

Tuesday 26 - Haddington - Town House

Wednesday 27 - Dumfries - Cairndale Hotel

Thursday 28 - Ayr - Western House Hotel

February

Monday 1 - Inverurie - Thainstone Centre

Tuesday 2 - Inverness - Ramada Inverness Hotel

Wednesday 3 - Benbecula - Dark Island Hotel

Thursday 4 - Stornoway - Caberfeidh Hotel

Tuesday 9 - Thurso - The Park Hotel

Wednesday 10 - Kirkwall - The Albert Hotel

Thursday 11 - Lerwick - Clickimin Leisure Centre

Monday 15 - Oban - Corran Halls

Tuesday 16 - Perth - Dewars Centre

All meetings will start at 7.30pm

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