Meeting of the Parliament (Virtual)

Meeting date: Thursday, January 21, 2021

Official Report 1022KB pdf

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Rural Economy (Impact of European Union Exit)

The next item of business is a statement by Fergus Ewing on the impact of leaving the European Union on Scotland’s rural economy. The cabinet secretary will take questions at the end of his statement, so there should be no interventions or interruptions.

13:29  

Just three weeks have passed since Scotland was taken out of the European Union against our will, but we are already seeing catastrophic impacts across all sectors in our rural economy. The United Kingdom Government’s trade and co-operation agreement with the European Union has erected significant barriers to trade for Scottish producers and businesses. Already, real economic harm is being caused and many people are now extremely worried about the short- and long-term effects on their businesses and sectors.

Members will be aware of the challenges that Scottish seafood producers are facing. There have been similar challenges in the meat sector, where new trade barriers have led to significant reductions in the volume of Scottish beef and lamb exports to Europe. The Scottish Government and Scottish food and drink stakeholders repeatedly warned the UK Government that businesses needed a grace period to prepare for such fundamental changes. Sadly, the UK Government continually ignored those warnings.

Expecting businesses—particularly small businesses—to adjust, within days, to complex new administrative burdens and costs would be a big ask at the best of times; to expect them so to do when they are reeling from the impacts of the Covid pandemic is simply unconscionable. We should not forget that behind the headlines, the commentary and the images that we have seen represent real people upon whom families, employees and communities depend. Businesses that have taken generations to create and nurture are being brought to their knees, practically overnight, by a callous Tory Government that seeks to point the finger of blame at anyone and everything instead of owning responsibility for the Brexit chaos.

Therefore I will now bust a few Tory myths. The Scottish Government and our partner agencies have done, and continue to do, all that we can to help businesses to prepare for such wholesale change. Scottish export hubs were properly resourced at the end of the transition period, and Food Standards Scotland delivered all the export health certificates that businesses had requested. To ensure that rising demand is met, we have increased the number of staff at the hubs, in line with our resourcing strategy. Food Standards Scotland continues to work closely with businesses and UK Government departments to support exporters in arriving at ports fully prepared for inspections and the new, Brexit-driven export bureaucracy.

However, sadly, we cannot fix everything. A whole new category of goods, now known as prohibited and restricted goods, is being impacted by Brexit. Those were previously traded freely with the EU, but Scotland and Great Britain can no longer export a wide range of produce there. We cannot export chilled mincemeat, meat preparations or mechanically separated poultry. Trade in category 1 and category 2 animal by-products is largely prohibited. Honey bees can no longer be exported to the EU or imported to Great Britain. Wild-harvested lobsters for on-growing cannot be exported. Some of those products, such as seed potatoes, are of great economic importance to Scotland. For months now, we have fought to secure equivalence to allow our highly respected Scottish seed potatoes to continue to be traded with EU states. Some, such as our good friend Ireland, are hugely dependent on receiving that stock. I have made it clear to George Eustice, the Secretary of State for Environment, Food and Rural Affairs, that should we fail to gain equivalence we expect Scottish seed potato exporters to be compensated for their losses.

However, it is not just trade with the EU that is being affected: the vast majority of such prohibitions and restrictions apply to trade in goods from Great Britain to Northern Ireland, thanks to the Northern Ireland protocol. At the last minute, the UK Government secured a derogation for some of the chilled meats that I have mentioned, which had been ordered by big retailers—but only for six months, and there is no certainty about what will happen after that.

Prohibited and restricted meat products are not included in the three-month grace period for export health certification. Their export is already causing issues, particularly for groupage exports. Last week, UK supermarket chiefs warned that further disruption was inevitable if border requirements dating from April were not simplified or the grace period for EHCs not extended. Many less fortunate businesses, which were not afforded such derogations, are struggling with the required export and health certification.

New health requirements have seen a halt to Scotland’s trade in sheep to Northern Ireland. Sheep cannot be moved unless they meet the scrapie monitoring requirements; that takes four years at a minimum and comes at a cost to the farmer.

The UK Government blithely dismisses all those impacts as “teething problems”, hoping that no one realises that the changes are permanent and will create permanent extra costs and burdens on our businesses, threatening jobs and livelihoods. However, as James Withers of Scotland Food and Drink pointed out yesterday, what we are reaping at the moment results from a kind of complacency and incompetence in thinking that, somehow, we were ready just to flick a switch.

The Tories have broken many Brexit-related promises, the worst of which is the promise that we would all be better off. That did not even make it beyond the Tory Government’s first spending review. It promised at least to match EU funding, but as matters stand Scotland is set to lose out on £170.1 million of equivalent common agricultural policy funding through to 2025 that rightly should be spent on our producers and rural communities.

We also have a right to expect £62 million for marine and fisheries funding, instead of the paltry £14 million that has been promised. We have a right to expect our share of the £100 million that was promised to sweeten the awful deal for fisheries to come directly to Scotland, for us to determine our investment priorities and needs.

I have called repeatedly for UK ministers to compensate the seafood sector for the disaster that it is facing. That disaster sits whole-heartedly with the Tories and their failure to secure anything like a satisfactory Brexit deal. The recent UK Government announcement on compensation for the sector shows what can be achieved when we keep the pressure on, but it is merely a sticking plaster. It provides short-term relief for only a few, and the conditions attached to the £23 million that was announced on Wednesday mean that few will qualify. It does nothing to fix the failing information technology systems, which are, in effect, being tested in real time, at the expense of our exporters.

However, we will not give up. I, together with the Minister for Rural Affairs and the Natural Environment, Ben Macpherson, will keep the pressure on. We will keep working with businesses and stakeholders to find and implement solutions and to identify opportunities for recovery. We will continue to provide resources and expertise to fix what we can and we will keep fighting to protect and promote the interests of everyone in rural and island communities, using all the powers that we have at our disposal.

However, there is no denying that the rural economy is in peril, not least from the very real and brazen power and funding grab that is under way. The Tories at Westminster will increasingly sideline our interests; we are being made small and we are being isolated from our closest and most important overseas trading partners. All the gains made in 21 years of devolution for our rural and coastal communities will be reversed.

The Tories have betrayed our rural communities, selling out key rural sectors, and they have broken so many promises to so many that it is doubtful whether they will ever be either forgiven or forgotten. However, Scotland has an escape clause. We can choose a different future. By choosing to become an independent nation, we can rejoin the EU and benefit from frictionless and barrier-free trade within the single market. That future cannot come soon enough.

The cabinet secretary will take questions on the issues raised in his statement. We need to finish this item of business by 2 o’clock.

I thank the cabinet secretary for advance sight of his statement. I remind members of my entry in the register of members’ interests, and as a partner in a farming business, I know that many farmers will laugh at the Scottish National Party lecturing others about IT failures when it is responsible for perhaps the biggest IT disaster in the history of farm payments, the effects of which are still being felt.

However, it is another week and another statement from the cabinet secretary—heavy on politics but light on actual policy. It was an all-too-typical rant, so let us get some facts on record.

Fergus Ewing talks about farm funding; the UK Government has guaranteed to protect farm funding until 2024—that is a commitment that Fergus Ewing could not make if he had his way and Scotland was outside the UK. The Scottish Government promised a report on future farm funding by the end of 2020; it is 2021 and that promise to Scotland’s farmers has been utterly broken. When will we know what the SNP proposes?

Fergus Ewing said that no-deal Brexit would cause irreparable damage to the economy and to people’s lives, then he voted against a trade deal that NFU Scotland welcomed.

Fergus Ewing said today that he has increased the number of staff at Food Standards Scotland, which is an admission that he did not put in place enough staff to begin with. Although Mr Ewing pretends to be against trade barriers, the Scottish National Party’s policy of independence would erect more trade barriers between Scotland’s farmers and the rest of the UK and the world than any form of EU exit. Is it not time that the SNP was honest with rural Scotland?

Regarding farm payments, those problems were fixed and now farmers in Scotland have received their payments earlier than anyone else in the UK. This month, the LFASS—less favoured area support scheme—payments have been paid, as far as I can recall, at the earliest point ever. I have just announced today that the second tranche of the convergence moneys—moneys that were rightfully due to our farmers and crofters but which were withheld by the Tories for six years—will be paid out very shortly. [Fergus Ewing has corrected this contribution. See end of report.] I will not take any lectures from the Tories on that.

Yet again, we find that nobody in the Scottish Conservative Party, particularly not its rural spokesperson, admits that the deal is a poor one for Scotland and for the fishermen. Frankly, the longer the Conservatives take the approach of not mentioning Brexit and its impacts, the more self-inflicted damage they will cause.

To answer the only actual question that I could identify in the statement that Mr Halcro Johnston made, we are being honest about Scotland’s future. I have made it absolutely clear for the past five years that, on Brexit and particularly on fishing, the Tories were overpromising and underdelivering. It was the Conservatives who were not being honest or straight with the public, when they promised that the EU funding would be at least matched. The fact is that we face cuts in the money that we would have had if we had been in the EU amounting to £170.1 million. Similar cuts are faced in Wales and Northern Ireland, so it is not only Scotland but all the devolved Administrations that are making that argument.

In conclusion, as long as the Scots Tories refuse to face reality, they will be punished by the electorate.

I would appreciate short answers, cabinet secretary, as we move along.

I thank the cabinet secretary for the advance sight of his statement.

Although farmers and crofters across Scotland will be relieved that a catastrophic no-deal exit from the EU was avoided, there is no such thing as a good deal when it comes to Brexit, and there are extra burdens in accessing labour and markets for many producers. The trade deal that has been cobbled together falls short of what was needed and promised and leaves a huge amount of uncertainty.

Will the cabinet secretary update us on what progress is being made on the development of a set of post-Brexit common frameworks that protect the integrity of the UK-wide single market? The rest of the UK remains by far the biggest market for Scottish agriculture, so ensuring that there is adequate consistency in alignment between our nations is vital.

Crucially, does the cabinet secretary accept that our agriculture sector is crying out for clarity from him on what support schemes will look like post the common agricultural policy, after 2024? The NFUS president Andrew McCornick told the cabinet secretary to

“Stop dithering and start delivering.”

The clock is ticking. Surely by now the cabinet secretary can tell our farmers and crofters when they will see the detail of the future support mechanisms policy.

That is not what the NFUS president Andrew McCornick told me this week when I spoke to him. He said that he is very satisfied with the payments that we are making and especially with our plan to reinstate LFASS payments next year at 100 per cent, with the payment of the convergence moneys within a very short period, with the earliest payment of LFASS and, generally, with the Scottish Government’s performance.

It is fortunate that I did not do what Mr Smyth advocated and make up a plan before Brexit was upon us because, had I done so, that plan would have been short by £170 million, which the UK has cut from our budget.

We have of course been working on frameworks for some time, and we have always sought to work constructively on those matters.

My last point in response to Colin Smyth’s remarks on Brexit is this: the purpose of my statement is to illustrate the fact that we are scarcely three weeks into Brexit and the damage is already being felt not only in seafood, where it is catastrophic, but across the whole rural economy. In other words, Brexit is already bad for Scotland not just in one respect but in just about every respect. That is the point to take from today’s statement.

The cabinet secretary has spoken at length about the shocking immediate impacts that are being caused by Brexit, but what does he understand to be the longer-term impacts for the rural economy in Scotland? Is he most concerned about what will happen in the longer term? Can he tell sheep farmers whether the French market for lamb at Easter—[Inaudible.]

I am afraid that you are breaking up. I ask the cabinet secretary to answer the first question, and I caution members to ask just one question.

As Ms Watt opined, I think that there will be long-term damage, which will affect markets and customers and the value and the volume of trade, and will result in the loss of protected geographical indicators for products such as Arbroath smokies, Orkney cheese and Scotch beef and lamb. That damage will include the loss of influence, the loss of workers, the loss of freedom of movement and the loss of frictionless trade. It is already clear that, in all those respects, Brexit will damage the rural economy in not just the short but the long term.

Yesterday, the Finance and Constitution Committee heard evidence that the level of EU structural funds available to Scotland has declined significantly in recent years as a result of the SNP’s failure to spend all the money available.

In contrast, the UK shared prosperity fund will be invested in and delivered directly to rural communities across Scotland and rural organisations, thereby helping them to rebuild from the pandemic. Will the cabinet secretary work constructively with the UK Government to allocate that extra UK funding directly to rural communities, as opposed to that money being hoarded and wasted at Holyrood, as has happened in the past?

The fact of the matter is that we still do not know much more about the UK shared prosperity fund than those four words. The fact is that that fund deals with entirely devolved matters and the UK Government is on a power grab, whereby it is seeking somehow to administer those matters directly. Of course, it cannot; it will be entirely reliant on our administrative services to do that. It is entirely a political move.

In order to get people to vote for Brexit, the Tories promised that there would be at least the same amount of money for the rural economy. They promised that throughout the UK, and the Welsh, the Northern Irish and I have argued that they have broken that promise. In our case, they have done that by reducing the funding for the period between now and 2025 by £170 million, which is a huge amount of money. It is really sad that none of the Scottish parliamentarians in the Tory party has had the guts to point out that that, frankly, is disgraceful.

The Northern Ireland protocol has undoubtedly made trade with Northern Ireland and the Republic of Ireland much more complex and costly. The cabinet secretary mentioned the problems that are being faced by sheep farmers. Are there other Scottish businesses and sectors that are going to have problems with trade?

Yes. There is a lot of concern in the whole farming sector and the meat sector, not just the sheep sector. I have also noticed that concerns have been expressed in the public press by AOG Couriers, Marks and Spencer and others. There are concerns that labelling of some products will, in effect, have to be doubled. For small businesses, it would not be productive or cost effective to have to provide two sets of labels for products such as whisky.

Joan McAlpine is quite right. Across a whole range of issues, there is huge concern that the frictionless and seamless trade that we enjoyed with Northern Ireland while in the EU will become difficult trade, expensive trade or lost trade.

Delays to exports of fresh produce have led to growing concern about mountains of food waste. There is an urgent need to break the deadlock on the export regulations, but what steps is the Government taking to create new domestic supply chain options for sectors such as seafood and fresh meat, which have been hardest hit?

We have certainly encouraged new methods of marketing food, such as direct marketing and online marketing. Many fishing interests—fishermen and fishing businesses—have been ingenious during lockdown in selling direct to the public, for example.

However, I make the point to Mr Ruskell that those efforts, worthy and to be commended as they are, are absolutely insufficient to make up for the potential loss of hugely valuable and very substantial European markets such as France, Italy and Spain. The scale of export of seafood produce to those countries is such that it would not be possible simply to divert that product elsewhere. We can, of course, divert some of it, and we should do that. However, that loss is a direct result of Brexit, and the point of my statement is to show the damage that has already been caused by Brexit across the rural economy, and the worries about that. We will do everything we can to avoid that damage, but, nonetheless, it will occur both now and in the future.

I thank Fergus Ewing for early sight of his statement. I agree with much, although certainly not all, of what he said. At the very least, this SNP Government must now acknowledge the perils of non-tariff barriers, whether in relation to the EU or within the UK. As the Tories are finding, it is risky to use the fishing industry for one’s own political ends.

What consideration has been given to establishing accredited local clearance centres, possibly in Glasgow or even in Peterhead, to allow seafood exporters such as the Orkney Fishermen’s Society in my constituency a better chance of being able to continue supplying their customers on the continent?

We worked hard over a long period to do our best to prepare for what was to come with Brexit, but the best preparation—a derogation, which we and the industry asked for—was refused. However, in response to Mr McArthur’s question, I note that FSS had set up three hubs by September last year and it worked round the clock to ensure that they were properly serviced and staffed with sufficient resource of veterinary officers, for example. The principal one is at DFDS.

I am happy to work with Mr McArthur to see whether anything else needs to be done in respect of the interests of the fishermen and fishing communities in his constituency. I am engaging with their representatives and I expect that at least one of them will be present at a meeting next week. I am happy to consider any more detailed proposal that Mr McArthur may have if he wishes to write to me on that or discuss it with me.

The cabinet secretary mentioned that third-country status has been denied for our seed potato exports. Will he say more about the practical effect of that and how it affects this iconic Scottish industry?

Rona Mackay is quite right. Seed potatoes in Scotland are regarded as being of the highest quality in the world. Our provenance is respected and our expertise is admired throughout the world and valued by our trading partners.

I have been working with George Eustice to assure equivalence in an article 44 application, which is to be considered at the end of January by the section of the Standing Committee on Plants, Animals, Food and Feed that deals with these matters. I am working closely with the industry, which I have met on, I think, three occasions in the past three weeks, in order to pave a way for success.

If that is not successful, there is a risk that the industry will lose some of its stock, for which I believe that the UK must compensate it. Even more important is the fact that the industry must make decisions about planting seed potatoes for next year’s crop, and it must make those decisions in a matter of weeks, not months. The compensation that was required would therefore not just be for seed potatoes that cannot be exported legally now because of Brexit and the ban. The problem would go on and affect next year, with the potential loss of markets. We are working very hard to avoid that scenario, but if it arises, Rona Mackay is right—the UK must pay up for all losses.

The cabinet secretary says that he will keep working with stakeholders to find and implement solutions. The problem is that Mr Ewing needs to come up with solutions now. He has been criticised by the president of the NFUS for the lack of future policies, and yesterday Chris Stark, chief executive of the Climate Change Committee, criticised the Scottish Government—not for the first time—for the delay in bringing forward a new agricultural strategy before 2024. Yesterday, he said—

No, no, Mr Carson. Brevity.

Will the cabinet secretary stop—to use his own words—finger pointing, take responsibility and clearly lay out his vision for rural support post 2024?

I completely reject Mr Carson’s analysis. It is hugely disrespectful to the public servants working round the clock for Food Standards Scotland—staff who have been provided by FSS at our instigation—who set up the hubs, such as at DFDS. The problems that have arisen have not arisen because of a lack of staff or a lack of action on our part, but because the UK Government has foisted a hugely complex system on an industry without giving it the opportunity to try to test it or sort out the problems over a grace period or derogation period. The UK Government did not even ask for that.

The brazen cheek of Tory parliamentarians knows no bounds. We will get on and we are getting on with the job of doing all we can to solve these problems. That is my top priority.

My goodness me, we have had enough of the Tories’ broken promises and their complete lack of remorse or acceptance of responsibility. It is one of the most shocking things that I have seen in 21 years of political life.

If I may, I respectfully ask for a little more brevity from you as well, cabinet secretary.

Can the cabinet secretary explain to my constituents in the fishing industry, of which there are many, how the UK compensation scheme will replace the income that they have lost over the past few weeks?

I had a brief discussion with George Eustice, who gave me very brief details of the scheme, a couple of hours before it was announced in public. The little that the UK Government has told us indicates that the fishermen compensation scheme will actually exclude fishermen. It will be the first scheme in history that was designed to support a group of people who will be ineligible for any support therefrom.

Any support will be only for losses incurred by processors. I am pleased that some compensation will be paid, and I fought long and hard with the UK Government for that. My understanding is that the UK Government will not pay a penny piece to any fishermen anywhere in the UK for the losses that they have sustained through being unable to ply their trade because of Brexit.

Does the cabinet secretary share the anger of people in the north-east about George Eustice’s comments on the radio that the devastation and desolation at Peterhead fish market was caused by Covid and that there is no fishing in January anyway? What will the cabinet secretary have to say to George Eustice about those comments the next time that he speaks to him?

I have sought to work—and it is my duty to work—constructively with George Eustice, and in the past we have done so. I find his comments that Covid has caused this issue to be incomprehensible. Nobody believes that at all, and I am astonished that he made those remarks. Will the Conservatives not just accept responsibility and say that Brexit has not worked out; that the disruption that Michael Gove said would never happen has actually happened; and that although the losers at the moment are the seafood community and businesses, many other sectors in the rural economy are starting to be affected? Surely acceptance of responsibility for its Brexit boorach is something that we should expect from the UK Government.