Scottish Government Blogs

Earlier this week at our stakeholder group meeting, apart from updating everyone on the events of the past couple of weeks in the Council of Ministers and European Parliament, the main agenda item was sharing some initial results from the latest modelling of scenarios for regionalising the future direct payments.

In effect, it was a bit of a dry run in advance of our big stakeholder conference on the subject on 17 April.  And it proved to be a very useful opportunity, because presenting the complex results of a couple of dozen scenarios, in a brief but understandable way, is quite a challenge.

Colleagues from the James Hutton Institute, who have done the modelling for us, gave the presentation, and with the help of stakeholders we identified a number of ways to try and make the way the results are expressed as effective as possible.  But I made sure we gave JHI a big pat on the back – they had done a fantastic job of boiling down 27 scenarios (plus a lot of technical explanation) into a concise presentation, which was a major achievement.

One important point is that the modelling is designed to let us analyse the impact of regionalisation decisions – how to define regions, and how much budget to allocate to each one – separately from everything else.  This means we have to hold all other factors constant, with the result that the modelling doesn’t predict what farmers can actually expect to receive under the new system.  That will come in the next phase of work, and will of course depend on what the final CAP deal looks like.

As always the stakeholder group papers will all go on our website.

Rural Affairs Secretary Richard Lochhead blogs about the outcome of two days of CAP reform talks in Brussels.

Important, exasperating, lengthy. These are just some of the word that could be used to describe the two days of talks on CAP reform in Brussels.

Important because agriculture is vital to Scotland – our farmers put food on our plates and look after our magnificent countryside yet many farm businesses rely on support payments to stay in the black. These reforms will have ramifications for many years to come.

Exasperating because – although ultimately we expect to be able to deliver most of our priorities – we weren’t able to press Scotland’s case directly as the UK Government negotiates on behalf of all the devolved administration.

Unfortunately we were denied access to a crucial meeting with the Commission and the Presidency which was possibly our last chance to exert influence over the shape of the deal reached last night. Coupled payments was an area I would like to have been able to argue for directly as our position differs markedly from that of the UK. I think it’s absurd that the agreement reached in Brussels would leave Scotland on the bottom tier of a two-tier system despite the importance of coupled payments to our livestock sector.

Lengthy because the talks ran on until after 11pm on Tuesday night as the Irish Presidency worked to achieve consensus between the member states.

So where do we go from here?

Now that the Irish Presidency has a mandate the discussions will begin between the Presidency and the European Parliament with a final decision expected by June. We must hope that commonsense wins the day with regard to coupled payments and the Parliament’s view, which had been to adopt a much fairer system, will prevail.

You may have heard journalists on the TV or radio saying that you can tell how serious an international meeting is by how many clean shirts the delegates have brought with them.

Agriculture and Fisheries Council is usually a one clean shirt event for me, arriving on a Sunday night and leaving the following evening.  But this week’s Council meeting is far from usual.  In fact this is a three shirt Council.

As I write this, the first session of the Council is taking place, in which ministers are giving their reactions to the latest CAP texts circulated by the Presidency late last week.  The rest of Monday will be taken up by the Presidency and Commission meeting with each delegation one by one.

Tuesday is due to begin with the Council looking at the small number of other items on the agenda in addition to CAP.  After that it’s pretty much anyone’s guess what will happen when.  In advance, many people were predicting that agreement on the CAP texts will be reached in the early hours of Wednesday morning, but we won’t get a clear idea till well into tomorrow.

Agreement this week is not the final word, as there still has to be negotiation between the Council and of Ministers and the European Parliament.  But it’s a very significant step in this lengthy process of putting the new CAP in place.

This State of the Economy Report comes after a disappointing 2012 – a year when it had been hoped that economic fortunes would improve and momentum would finally return to the global economy. However, the economic outlook is more positive than this time last year. The Report focuses on the business sector, as in a climate of deleveraging by both governments and households and with world trade remaining fragile, the performance of the business sector will be key.  Therefore 2013 could be pivotal for business and recovery in Scotland.

Recent Global Economic Developments

 The Euro Area was a source of uncertainty throughout 2012 though some relative calm was restored in the second half of the year with European Central Bank purchases of short-term sovereign bonds and progress toward formation of a banking union.  However, on-going political uncertainties, along with remaining underlying structural weaknesses, will lead to economic conditions in the Euro Area remaining fragile for the foreseeable future.

The US narrowly avoided a steep fiscal cliff at the end of 2012. Although fiscal retrenchment is still necessary, this has been delayed and will be more gradual than feared. This will still however, act to dampen growth in the world’s largest economy and a key export market for Scotland.

The UK economy is estimated to have fallen back by 0.3% in the final quarter of the year, following a bounce-back in the economy in Q3. Given the prevalence of temporary factors influencing individual quarterly growth rate figures, it is perhaps more informative to consider growth over the year as a whole, with output growing by just 0.2% in 2012. Nearly five years on from the start of the crisis, output remains some 3.0% below pre-recession levels.

Recent Scottish Economic Developments

The most recent data for the Scottish economy showed welcome growth of 0.6% in the third quarter of 2012. This was encouraging as it appeared to reflect evidence of a degree of underlying strength in the economy. The UK figure was slightly stronger though this was influenced somewhat by the temporary impact of the Olympics which boosted growth to 1.0% in the same quarter.

The labour market in Scotland has shown mixed signals in recent months; the unemployment rate has fallen recently but employment and inactivity levels have worsened in the past few months with fewer people in employment and seeking employment. There has however, been a substantial drop in youth unemployment from a peak in late 2011 and early 2012.

An increase in self-employment has been reflected in a rise in business start-ups. As part of the assessment of the business sector in Scotland, we analyse the structure of the business sector in Scotland, start-ups, insolvencies, investment trends and export performance.

 Future Prospects

The global economy faces a number of challenges over the long-term, however, the uncertainty that characterised much of last year in terms of the immediate outlook for the global and Euro economies has undoubtedly improved compared to Summer 2012.

Forecasts for global growth in 2013 are still low by historic standards but an improvement on 2012. There is even the possibility for the growth outlook to be revised up as the year progresses.

Therefore, 2013 has the potential to be a pivotal year for business in Scotland within the context of the recent recession.

The Scottish economy has already experienced a significant period of deleveraging and in some parts of the corporate sector there are excess cash holdings. This means that in an environment of increased confidence and less short term uncertainty, investment by business may be likely to pick-up.

Headwinds of course still exist, however an improving external environment, coupled with the full effects of the deleveraging process beginning to ease, has the potential to improve business confidence and investment. Such a cycle can drive a sustainable recovery in the medium term.

As last year, we still expect the Scottish economy to return to near trend growth by the end of 2014 as well as returning to pre-recession levels of output close to the end of that year.

We passed a big milestone in the CAP negotiations yesterday when the European Parliament voted through its position on the proposals.  There was an air of excitement in our office as, while some of us were going in and out of meetings, others were at their computers watching the vote play out – and picking up extra snippets of info via emails from Brussels office colleagues who had travelled to Strasbourg to cover it for us.

I’ve only had time to pick up a few main points as yet, but here are a couple of highlights.

The Parliament seems to have confirmed the view taken in its agriculture committee, that coupled payments should be allowed at up to 15 percent of the total.  That’s also Scottish Government’s position, so it’s good news for us.

However, on greening it looks like the Parliament has preferred to stick with the European Commission’s three green measures, albeit in amended form, rather than permitting alternative measures provided they are environmentally equivalent.  We have always said the equivalence option should be made available, not least because otherwise climate change doesn’t really feature in greening despite being the predominant environmental challenge we face.  So when it comes to the final compromises, we will probably be favouring the version of greening being developed in the Council of Ministers, which does envisage permitting equivalent schemes.

The reason I’ve only had time for a quick skim of the EP vote is that I was in Parliament in the afternoon for a debate on CAP and modelling of direct payments.  It’s not my job to take part in political debate, of course, but I might just take the opportunity to clear up a factual point.  The Welsh Government hasn’t told farmers in Wales what they will be getting as payments under the new CAP.  It has gone out to public consultation with some illustrative numbers, but the document states very clearly that they are not final and will definitely change – not least because the negotiations haven’t finished yet. Even in the short time since the consultation document was published, at least two new options have been introduced which, since they didn’t exist at the time, are not reflected in the scenarios.

Our own next tranche of modelling (I like to throw in a French word every now and then to keep my language skills from going rusty) is in full swing.  The plan is to communicate the results to our immediate stakeholder group of 30 to 40 representatives at a stakeholder group meeting; to a wider audience at a workshop next month; and to anyone who’s interested via our website.

Yesterday I visited a project that showed me how innovative and creative ideas can provide real opportunities for our young people. I visited the Streetleague project in Glasgow which exemplifies the Scottish Government principles of reform. Simply put, it delivers improved outcomes for local people through partnership working and a focus on prevention.

Streetleague specialise in changing the lives of disadvantaged young people through the power of football. The project engages with the ‘hardest to reach’ young people in a structured football and education ‘Academy’ programme and is aimed at young people who are at risk of disengaging from the labour market. As a result these young people may find themselves with a lifestyle that is difficult and that would make it very hard for them to reconnect and progress without substantial cost to the public purse. This activity is therefore one of both prevention and progression.

For me it is a perfect example of the type of innovation in the design and delivery of public services that the Scottish Government wants to see across Scotland. In the last 12 months through focused intervention, a programme has been developed in conjunction with Glasgow Life to secure a number of jobs for the young people in the City’s sports centres, including the Emirates Arena.

I met two young people who were ex-participants of the Streetleague programme who have gone on to secure employment at the Arena. They live locally and are working in an environment that is developing their skills and experience and earning a wage. We need to prioritise investment in preventative approaches to help all young people engage in employment, education or training and prevent negative outcomes.

There are positive signs of this type of innovation happening all across Scotland which are helping to re-shape public services in line with the Government’s reform approach to improve outcomes and I look forward to seeing more of them in the months to come.

As the Scottish Parliament debates Scotland’s National Food Policy, Rural Affairs Secretary Richard Lochhead outlines his vision of Scotland as a good food nation.

Food is vital to our lives, our environment and our economy. In the past few weeks, the horsemeat scandal has reminded society of this and has raised awareness of provenance and quality.

Consumers are asking more questions about what’s in the products they are buying and what’s on their plate – and that can only be a good thing because Scottish produce competes with the best.

Retailers and food service companies should respond by sourcing closer to home, adopting ethical purchasing policies and acting more responsibly.

This transformative moment in the food debate should change the way we think about what is on our plate – what we are eating, where it is from and how it was produced.

The horsemeat scandal has made us all pause and think.

In my view provenance is the underlining factor. Knowing where your food comes from and taking assurance from high standards.

Our £12.4 billion food and drink industry is a real Scottish strength. We are supporting that industry like never before.

From global to local, our provenance is known for quality and trust.

We should back those who do it well. That means backing Scotland.  Horsemeat has taught us the real value of these words.

Let’s make Scotland a good food nation.

Somebody asked me at an event earlier this week how the CAP reform negotiations are going in the Council of Ministers.

By about the end of February, I’d say something like 75% of the text had been pretty much agreed between the member states. As always, the trickiest issues (like greening) had been left till the end, so the 75% already done was, if you like, the easiest bits. And by the end of the March Council meeting on 19^th March (or more likely in the wee small hours of the 20^th), the Council is supposed to have finalised its position sufficiently to give the Presidency a mandate to go ahead and negotiate the final compromise with the European Parliament.

So my summary of how things are going was: we are on track for agreement in March, but having taken over a year to deal with the 75% of easy stuff, we’re now trying to sort out all the remaining 25%, including the hardest bits, in about three weeks!

Things have really needed to accelerate, therefore, and we’ve certainly seen a sense of urgency in the meetings in Brussels at official level. Like all other administrations across the EU, we’ve been having to look at masses of new material, sometimes stretching to literally hundreds of pages, and give views on it almost overnight.

It’s not just a case of continuing to press for the things which we want but which are not yet in the text; we also have to keep an eye on the things we do like about the text, to make sure they don’t get watered down or deleted.

And we’re trying to be really precise about what we want. At the start of the negotiating process, you can get away with saying broad-brush things like “the crop diversification rule must not impinge negatively on farm practices to an extent which is out of proportion with the environmental benefit it delivers.” But at this late stage, general statements like that are no use at all, and instead we have to be saying things like “in Article 30, paragraph 1, it needs to say 20 hectares instead of 15 hectares”.

Meanwhile, next week all attention will turn to the European Parliament where, following the vote in the agriculture committee in January, all MEPs will have the chance to vote on the CAP package. It should be a momentous couple of weeks.