SHG 12 – 04
WS1 UPDATE – MODELLING FUTURE AREA BASED PAYMENTS IN
SCOTLAND
Introduction
1. Under the future direct payment scheme, Scotland will need to move to
area-based Basic Payments (BPs) where a given budget is divided by the
number of eligible hectares, to give an average per hectare payment rate
when payments are 100% area-based.
2. Since Scotland has a wide range of farming systems and land types it may
wish to be able to set different final area rates. In their draft regulation the
Commission have provided two tools to help countries do this. First there is
the idea of a country being able to have regions where funding can be ringfenced within a defined area. Secondly countries have the ability to use
objective criteria to divide funding for direct payments between the regions.
The two factors that will determine the final area rate in a region will be the
area of eligible land that it contains and the size of the regional funding pot for
distribution through direct payments in that region.
3. A significant amount of exploratory work1 has already been undertaken
and shared with the Stakeholder Group. This paper sets out our plans for the
next stage of the modelling which will seek to explore possible options that
Scotland could choose to distribute direct payments under the future CAP.
Previous work
4. The new work which SG is commissioning with James Hutton Institute
(JHI), builds on earlier work they did for the Brian Pack inquiry. This earlier
modelling considered ten scenarios (either LFA- or LCA- based) and it
assessed the possible changes to business-level payments these scenarios
(for details see http://www.macaulay.ac.uk/LADSS/cap_flattening.html).
5. Brian Pack also looked at a range of funding options and in some cases
the highest payment rate was assigned to better quality land whilst in others
the highest rate was assigned to the poorer quality land. In addition, one
scenario (S4) assumed a single flat rate across Scotland. Overall, it was clear
that all scenarios resulted in redistribution not only between but also within
geographic regions and farm sectors.
Broad aims of the next round of modelling
6. This round of modelling needs to start to assess possible implications of
and opportunities for Scotland from using the various tools that Europe is
providing for future direct payments. It therefore needs to help us assess the
potential distributional impacts from designing regions in different ways and
with different amounts of funding designated to these different regions.
1
for a summary of the work, visit the CAP Stakeholder Group section of the SG website.
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SHG 12 – 04
7. At this stage, modelling cannot predict the actual size of future payments
since we do not yet know what out future budget will be and neither do we
know what other schemes Scotland will have to or will choose to implement
under the future CAP.
8. Modelling can however show relative differences in which the different
tools at our disposal might be used to distribute future payments. For some
parameters the modelling will also include some sensitivity analyses, so that
we can see what effect a small increase or decrease of input – say eligible
land – has on the outcome (potential payments).
How could Scotland identify regions?
9. The Commission’s draft regulation (art 21 (1)) indicates that Scotland
would have considerable discretion over the criteria it could use to identify
land belonging within a region. Broadly speaking Scotland can consider using
administrative, economic or land quality type of criteria to define its regions.
10. WS1 has considered a wide range of options on which to base future
payments and our initial thoughts were discussed at the Stakeholder meeting
on 6th September.
11. WS1 has considered the issue further and identified for the purpose of the
modelling, nine different ways to split Scotland into regions which are set out
in Annex A.
Q1. What do stakeholders think of the regions shown in Annex A? Do
these reflect good coverage of the regions Scotland might wish to
consider for future direct payments?
How could Scotland distribute funding between its regions?
12. Article 21 (2) of the Commission’s draft regulation would allow Scotland to
distribute funding between its regions using objective and non-discriminatory
criteria.
13. No examples are given in the draft regulation, so the types of criteria that
Scotland could consider would be things like splitting Scotland’s national
ceiling according to historical allocation or we could consider dividing
Scotland’s national ceiling according to an economic measure (eg the region’s
contribution to Scottish agricultural output), or by some land-based-measure
such as agricultural area.
14. The modelling will combine the different options for establishing regions
within Scotland with these different options for the allocation of regional
ceilings
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SHG 12 – 04
Q2. What do stakeholders think of the idea that the modelling should
consider several options for the allocation of regional ceilings such as
historical, economic and land-based?
Decision on additional land
15. A key factor that will influence future payment rates is the area of eligible
land under any future Basic Payment Scheme. We won’t know the actual
final area until farmers declare their eligible hectares on 15 May of Year 1 of
the new scheme.
16. At this stage we know that the future area under direct payments will be
“any” eligible land under the control of an eligible applicant on that date. This
may suggest that the area of land under the future scheme may be higher
than at present but not so high as to include all the extra 1 million hectares of
naked acres that JHI have identified as being potentially available.
17. Since we do not know the actual area of land under future direct
payments, we need to decide on an appropriate area to use in the modelling.
We could use the current area under SFPs (5.4m ha) or we could try to
estimate a slightly higher figure such as the area of land held by the 2011
SAF population (6.2 m ha).
18. However, since the Commission’s draft regulation also includes the
Scottish clause that would enable a minimum stocking rate to be set on land
naturally in good condition, this would suggest that some land currently held
by slipper farmers might fall out of the system. The area of land that falls out
of payment in this way, may be either higher or lower than the new area that
comes into the new scheme.
Q3
What area of land do stakeholders think we should include in the
modelling? Should it be there area of land currently under SFP so that
we get some sense of like for like comparisons or should we try and
take account of extra new land for example by using the area of land
currently held by SAF applicants, which runs the risk of ignoring the
land that falls out of future payments because of insufficient activity?
Outputs
19.
On completion of this work we should be able to estimate and present:
(a) Where the money is earned/claimed at present – the Pack model
averaged SFP across the parcels within a business but many
businesses have land of mixed quality, perhaps located on more than
one site;
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SHG 12 – 04
(b) An appropriate objective basis e.g. using historical, economic or
land-based criteria for distributing funding between the different
regions;
(c) The distributional impacts of different scenarios at a business level.
New direct payments (BP plus Greening payments) to businesses will
be summarised in terms of increases or decreases in payment and by
characteristics such as farm type, size or geographical region; and
(d) Supplementary analysis will show the potential impact in terms of
numbers and characteristics of the businesses potentially affected by
the implementation of a Scottish clause (ie of setting a minimum
activity requirements on rough grazing land;
(e) any assumptions made during the course of this work.
20. Emerging ideas relating to the Basic Payment Scheme are being set out
and discussed by Member States as part of the ongoing negotiations. For
example, France is considering the possibility of paying banded rates within, a
given region (based on the number of hectares). Where additional proposals
emerge that are of interest or relevance to Scotland, RESAS will undertake
scoping to assess whether and to what extent they can be incorporated into
the modelling.
21. This work will allow us to narrow down the options for regionalisation. WS1
will give an update on progress at the next CAP SHG meeting on 17th
January, and the initial findings will be presented to stakeholders at a meeting
around late March/early April in advance of the “CAP moving forward”
conference/workshop provisionally scheduled for 17th April 2013.
Scottish Government
7 November 2012
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SHG 12 – 04
ANNEX A – LIST OF MODELS FOR REGIONS
Number of
Regions in
Scenario
FARM LEVEL SCENARIOS
Scenario
Regional Boundaries
Explanatory Notes
LCA Farm
Level 1a
2


1 – 5.3
6.1 – 7
LCA Farm
Level 1b
3



1 – 3.1
3.2 – 5.3
6.1 – 7







1 – 3.2
4.1 – 4.2
5.1 – 5.3
6.1 - 7
Non-LFA
LFA
LFA-HIE



Arable (incl. Temporary Grass)
Permanent Grass
Rough Grazing
As per LCA National but each ‘region’
is a Land Type class (based on main
land use in IACS over the period 20072011).

To be confirmed
Each ‘region’ is a group of LCA classes.
Parishes are allocated to a region
based on the ‘dominant’ LCA grouping
of its land. This refers either to
whichever grouping the majority of its
land falls within or, in the event of no
majority, the grouping that
characterises the largest element of its
land. Regional ceilings/ PEA
determine payment rates. Farms’
payments determined by their eligible
hectares and the regional payment
rate.

€1-<20; €20-49; €50-99;
€100-149; €150-199;
€200-249; €250-299;
€300-349; €350+
Arable (incl. Temporary Grass)
Permanent Grass
Rough Grazing
LCA Farm
Level 1c
4
LFA
3
Land Type
Farm Level
3
Each ‘region’ is a group of LCA classes.
Regional ceilings are divided by
regional eligible hectares to determine
regional payment rates. Farms’
payments are determined by their
eligible hectares under each ‘region’
multiplied by the €/ha rate for each
hectare.
As per LCA National but each ‘region’
is an LFA class.
PARISH LEVEL SCENARIOS
LCA Parish
8
Historical
SFPS-Parish
9
Land Type
Parish
3
ParishEconomic
Output
3




To be confirmed
As per LCA-Parish but each ‘region’ is a
banding of parish average SFPS
entitlement values.
As per LCA Parish but parishes are
allocated to a region based on their
‘dominant’ land type.
As per LCA-Parish but each ‘region’ is
defined by the parish’s characteristics
in accordance with a given economic
output indicator (e.g. Standard
Outputs).
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