 Damn graduates of good morningand welcome to the seventh meeting in 2024 of the finance and public administration committee. The first item on our agenda today is an evidence session with the minister for community wealth and public finance on the land and buildings transaction tax, miscellaneous amendments, Scotian order 2024. The minister joined today by Scottish Government official Laura Parker, the council leader on the political and business forever policy lead. Direct for tax and revenues. I welcome our witnesses to the meeting and invite the minister to make a short opening statement. The Land and Buildings Transaction Tax, a miscellaneous amendment Scotland order 2024, provides for amendments to schedule 2A of the Land and Buildings Transactions Scotland Act 2013 and also introduces a new schedule 6A to that act. The amendments to schedule 2A relate to arrangements in place for the additional dwelling supplement. They address key stakeholder concerns with the existing legislation and ensure that the arrangements for the ADS work as intended. The new schedule 6A provides extended relief from both residential LBTT and the ADS for local authorities purchasing property to meet local housing needs. This broadly aligns with treatment of local authorities with that of registered social landlords and will help support our wider housing policies. The Scottish Fiscal Commission considered the financial implications of those amendments in their December 2023 forecasts. The order was developed following a thorough consultation and review process. That included both an initial call for evidence and views, followed by a consultation on draft legislation. The result of that process is a package of amendments that addresses key stakeholder concerns with the legislation in its current form, ensuring that taxpayers are able to claim their reliefs and exemptions that they are entitled to and extending support where needed. I welcome the contributions from a wide range of stakeholder groups in developing the content of this draft order and I hope that the committee will support it this morning. Thank you very much for that helpful opening statement. I should have said that we have apologies this morning from Mike O'Mara, who has transported difficulties a year or two later. I'm afraid that we don't know where Ross is, but he still has five members of the committee. Before we open out to colleagues around the table, I'll be asking a few questions. What I would say first of all is that this SSIP has been fairly broadly welcomed. However, there are one or two issues that have been raised with us. One is from the Scottish Police Authority. What has been said is that, despite acting under a statutory duty, the Police on Fire reform Scotland Act 2012 seeking to comply with the housing standards and house acquisitions being funded by the Scottish Government annual grant in aid due to a lot of direct connection with housing legislation, there is no exemption from LBTT or ADS available to the Scottish Police Authority. Why hasn't the SSIP used an opportunity to change that? We are very grateful to the work that the committee did in reaching out to stakeholders for further evidence ahead of the session. It's useful. We very much know the points that have been raised by the SPPA. We are looking into the matter and giving it careful consideration. It's not something that we were able to address as part of this set of amendments. The committee appreciates the role of the local authorities. For example, in regard to housing, it's quite distinct and different from other public bodies and authorities. However, it is something that we are looking at carefully and very happy to engage directly with the Police Authority on the matter and to update the committee in due course. Thank you. What the police have said is that it will not register social landlord the Scottish Police Authority has undertaken to align itself in principle with the requirements of housing associations and local authorities and is committed to working towards achieving the energy efficiency standard for social housing and the Scottish quality housing standards for its housing stock. It does seem unfortunate that it has been omitted. If there is going to be further consideration of that, when would we expect an SSI on that basis to come forward? I'm not in a position to give timescales. Clearly, we will consider that in relation to any aspects pertaining to housing relevant to other public bodies. We will, of course, consider that not only from the perspective of tax, in this case LBTT, but more broadly with engagement with housing colleagues. That has made reference to earlier more than happy for Government officials to engage directly with the Police Authority on this matter. The Chartered Institute of Taxation has said that the only issue with this SSI is that it is overly restrictive. It is concerned that the Scottish Government is bringing in the SSI's piecemeal, and that certainly appears to be the case. Members of the committee have suggested that we should have a regular fiscal bill that allows for a point in time that all amendments to legislation are carried out rather than undertaking these piecemeal changes to tax legislation. Given the fact that it looks like it might have to bring forward another SSI just to look at the Police Authority, would that not be a good way forward? I recognise the interest in this. Liz Smith and I have had exchanges in the chamber on this matter. I think that there is merit in further exploration of it. What I would note is that having an annual finance bill is an undertaking for Government, but it is an undertaking for Parliament as well. I think that it would be very important for Parliament to be involved in that process. Clearly, we would be an important role for the committee. I recognise the committee, of course, as a significant programme of work, but I am very happy to engage with the committee to explore how we can build upon the work that was undertaken pre-pandemic through the devolved taxis working group. I am very keen that we can look for ways in which we can build upon that, but what I think is important is recognising it while there is an argument for an annual finance bill. It is important that we take account of the views of Parliament and how that would manage. What I would say, of course, is that, with that particular SSI, we are considering that as a result of quite a broad consultation and engagement process. We are also, through the Scottish Aggregates Tax Bill, bringing forward amendments to the powers for revenue Scotland. I appreciate that the committee will be considering that legislation later in the spring. I am sure that we will have the opportunity for further conversations in that space. We are using legislative opportunities to bring forward reforms, whether that is in primary legislation or, as the case may be, via an SSI. I think that the fundamental point around looking for something that is perhaps more legislatively neat and efficient is that there is merit in that. I think that it is not just a matter for Government, as I say, but for Parliament as well. I am very happy to engage in that to explore what we can do going forward. South Lanarkshire submitted a short but fairly interesting contribution whereby it talks about the flexibility or the lack thereof in SSI. It is important to recognise the need to ensure clarity on what is exempt from the tax. We suggest that it might be beneficial to consider some flexibility in this area, particularly as current grant conditions do not cover all property acquisitions that a local authority or landlord might require to make. They go on to mention some groups, such as homeless households or gypsy travels. Where is the flexibility in terms of the SSI in order for local government to take decisions on specific groups that they might need to with regard to LBT, etc., and ADS? What we have in the SSI reflects the work that was undertaken through the call for evidence and consultation, and the provisions in it relate to housing under the 87 and 88 acts. That represents progress. I know that local government has been welcomed, but I want to state that. I think that that speaks to the previous point that we were discussing around future reforms. This is a process rather than an event. Of course, tax policy will continue to develop more broadly in the work that the Government has committed to around a refreshed tax strategy and MTFS, but also in those operational and administrative and technical matters. With regard to the particular points that have been raised by the local authority, I am happy to consider further as part of that on-going work as we keep policy under review. Clearly, we always have to give detail considerations to those specific asks. I do not know if there is anything that you want to add, Laura. No, I think that is pretty comprehensive. As the Minister said, the Scottish Government did engage in quite an extensive consultation process with local authorities and the draft order that is in front of me reflects the key ask from local authorities stakeholders in terms of the scope of the relief. However, as the Minister says, tax maintenance is very important. The Scottish Government is always happy to keep these things under review. What will be the financial impact on the Scottish Government of this SSI? The SFC, which has given me a forecast for most of the measures that are below their materiality threshold, estimated a maximum of £7 million over the period with regard to the extensions for the timelines from the 18 to the 36 months. Over what period is that £7 million extra revenue for the Scottish Government or less revenue for the Scottish Government? Do you want to come in with the details just to pick up the numbers in front of you, Laura? It is £7 million of relief given to tax fairs across the forecast. It hits that £7 million figure in 2020-28-29 prior to that. It is slightly over, so it is £1 million in 2067. For clarity, are you saying that by 2029 it will be £7 million a year or £7 million up until and including 2020-28-29? In 2028-29 it will be £7 million a year. Right, so that is £7 million a year. What I would note is that the majority of the claims for repayment of BDS tend to happen within 12 months, which is broadly similar to the equivalent taxes in England and Wales. That is a matter of work that is way through over the forecast period. Say that, particularly the number of £7 million at the end of the forecast period, we will continue to monitor both the revenue and the forecast SFC for just going forward. Of course, the Scottish Police Authority, because it is important that they are able to provide housing, particularly in rural, island areas, any idea how much relief would apply if, for example, they were brought in in a future SSI? Has that not been calculated as yet? I do not have that number, but I would say that the number of houses and hostels that are covered by the police authority is far smaller, significantly smaller proportionally than they are compared to local authorities, so we have overall problem with that. However, as part of that engagement that we have with the police authority, I am more than happy to explore that further and update the committee in due course. The Scottish Property Federation has said that tax legislation will cover each and every eventuality, and given the potentially high taxation burden of ADS, we will continue to feel that a power to enable relief for exceptional circumstances should be applied in the discretion of Revenue Scotland, and that would bring additional fairness. I want to say that this is something of a missed opportunity to address the wider concerns that we raise. I am just wondering whether that is your comments on that. In terms of the circumstances that have given rise to the ask for an exceptional circumstances provision, we have sought to address some of the specific amendments that we make within the order. Reducing the ask for an exceptional circumstances provision is important in response to some of those specific circumstances. On the actual position of an exceptional circumstances, discretion to power is something that we gave consideration to, but the concern is around administrative complexity and uncertainty, particularly for Revenue Scotland as for taxpayers. What we have sought to do through the order is to address some of the specific concerns that have given cause for concerns to be raised about the way in which ADS had been operating previously. That is why we have not pursued an exceptional circumstances provision, but we have sought to have a targeted approach in addressing some of the particular issues that had arisen previously. I mean, you talked about complexity and that is one of the issues that has actually been raised by the Law Society of Scotland. What they have said is that they are all relating to ADS's complex and noons. We do not consider that the amendments in and of themselves will simplify the law in this area, and in some cases may complicate the position for certain taxpayers depending on their circumstances. I am sure that colleagues may wish to give examples of those that are in their paper. What should I review on that? One would have thought that that would be—the whole purpose of that was clarity and simplification, and yet the most sight of Scotland appeared to be of the view that the opposite is the case. I recognise the complexity involved and the issues that ultimately led to the call for evidence and consultation on those regulations speak to the complexity and the issues that arised. I have received much correspondence from colleagues outlining concerns that they had about the way in which ADS was operating, and that is why we took forward this piece of work that seeks to address those concerns. On the regulations specifically or the order specifically ahead of 1 April, should Parliament agree to the order before us, Revenue Scotland will be producing clear and comprehensive guidance that will be shared in advance. My understanding is that Revenue Scotland has already shared the work on this with relevant stakeholders in tax, accountancy and law, and my understanding is that Revenue Scotland intends to host a series of webinars in advance to 1 April to ensure that sufficient information and guidance and awareness are provided about how the system will operate should the regulations be approved by Parliament. I will open out the session to colleagues. The first questions will be Michelle to Fawr White-John. Good morning, minister. Just a couple of weak points. In general terms, the changes to ADS in particular are welcome, because there were, as we know, quite a few anomalies. I just wanted to check—it was a comment by the Chartered Institute of Taxation, where somebody finds themselves in a position taking an inheritance of a property and then seeking to buy their own home. There has been provision of relief made in the period between a property inherited and the conclusion of missiles of a new property. The purchase of the new property, I should say, but the point is that missiles are now invariably—it has been the case since about 2008, probably, on the day of purchase. The days where you used to conclude missiles and then purchase would take later have changed because of lack of availability of finance. I just wanted to understand what you are thinking, because it seems like a relief that will get very little take-up altogether. Therefore, people are still going to continue to be impacted where they find, through no fault of their own and no choice in the situation where they inherit a property but still need to buy their own family home. I will just move context around that. I think that the first point that I would want to make, as much as I made reference to having received correspondence from colleagues on the operation of ADS, the circumstance is that overwhelmingly the system works as intended. It works effectively at the level and it proves to be an important—the whole system—an important source of revenue for the Scottish Government. Those measures that we are considering today are quite narrow but perhaps will not affect a significant number of people, but they respond to concerns that have been raised. Therefore, the point about responding to a very unique set of circumstances is one that I accept. Where this particular provision seeks to cover is to take the situation that we have missed us in the close-up transaction and are taking it happening almost simultaneously then, there is not that window, but it is when there is that window between conclusion and missus and the effective transaction day, where someone were to inherit a property. Obviously, the membering of its LBTT is not biting on the actual inherited property. It would be someone coming into possession of a property and then purchasing another property after that. That would be a situation that is almost outwith their control to some extent, so it seeks to provide a relief, which we would say has been as fair and as reasonable. I recognise that the situations when that might be a benefit might not be frequent, but for those who find themselves in that situation, I think it helps to provide greater certainty and fairness within the system. You make a fair point about the probability of occurrence in both scenarios. It is not going to be huge volumes, but when it does occur, it could potentially have quite a high impact on one person, which is why following up in a convener's comment about having some kind of discretionary power for Revenue Scotland, which is HMRC. You are already conceding that there continue to be some scenarios that require further SSI and ironed out because of the nature of it. I am still a bit unclear why you would not grant discretionary power to Revenue Scotland. I know that you will look for certainty in the law, and that is simply sensible, but you yourself are conceding that there continue to be some anomalies, as we get to the detail of that. Having that discretionary power by Revenue Scotland would surely allow for ironing out those anomalies. If HMRC has more resource, I understand that, but they can do that without continuing illegal cases. Why would not Revenue Scotland not be able to… I understand that, with HMRC, the discretion is to extend the timeline. I appreciate the 36 months in England, and one of the things that we are doing through these regulations is extending to 36 months. On the point of whether or not there should be that discretionary power for Revenue Scotland, I think that that is a conversation that we can explore. The point that I want to make is that it would be quite a significant change from the way in which we operate at the moment whereby Parliament legislates and Revenue Scotland provides the guidance. It would be a quite significant change for Revenue Scotland in recognising that HMRC operates under a different setup. On that broader point, that is something that we can consider. It would require a lot more detailed consideration and a lot more exploration, but I can back to the point about how we have sought to address the issues that have been raised that have led to this order coming before the committee, which is to having identified through consultation and engagement a number of those particular anomalies seeking to address them directly in a targeted approach for the amendments that the order provides for. I think that it makes a fair point about that being a change and that it may be something along with similar discussions that we are having about a finance bill that is worth considering at some point because there are always unintended consequences with our tax, but there is also the complexity by shunting in Scottish taxes within some of the complexity of a wider UKE framework that may lend itself to that. I think that that is a separate discussion, but that is probably all my points, convener. Okay, thank you. John has up to doubt, so it is going to be a list to be followed by Jamie. Thank you. Minister, I was very grateful to hear your comment that you are open to some further discussions about a finance bill. I just wondered, could you tell us, has that discussion been within your own portfolio or has that gone further up the scale to Cabinet? It's the discussion that we have had previously. I think that much of the context was looking to recommence the work of the devolved taxis group, but I know that I had to go into a bench during the pandemic. The point that I would come back to is that it's something that Government, we're open to discussing further, but I think it's, I appreciate it, I repeat myself here, but it's really important that there's that engagement with Parliament on the matter if we were to move to that particular system and approach. I know that it would be a piece of work at this committee, I imagine, would ultimately have to lead on, so I'm conscious of that. I am, as I say, more unhappy to have further discussions on this, and I know that officials are happy to engage directly with the committee as well, but I appreciate that there's a broader set of considerations to take into account in terms of the feasibility. Thank you for that. It's just that ICAS says in its contribution that, historically, we have found that, generally speaking, the awareness of the Scottish taxes is not high in Scotland, as we know that, and there is a need for improvement in communications by the Scottish Government to ensure that that improves in line with the Scottish Government's own framework for tax principles. Obviously, we've heard quite a lot from Audit Scotland that there is a need for greater clarity and transparency about tax in general, what decisions have underpinned certain tax decisions, where is the money coming from, et cetera. I think that, in the point that both the convener and Michelle Thomson raised, it is a valid one that, to get some extra clarity and transparency, the idea of a finance bill to try to improve that is quite appealing, I think, to this committee. I completely take your point about the scrutiny of that has to be by Parliament, not just by specific committees, but I think that we would be quite grateful if that discussion could go a wee bit further. I would be more happy to now ask the officials to engage directly with the committee following this meeting and we can discuss how we can take that work forward. My second point is that you said in answer to the convener that you are not able to provide any timescale should any further amendments have to be adjusted. Do you have any thought that there might be a number of adjustments that have to be made or are you reasonably content that should we pass this, that that is going to be effective in addressing most of the concerns that we have heard? I think that the previous conversation around a finance bill on a merits of it speaks to the fact that there is always a need for care and maintenance and we have to take decisions based upon the information that we have at the present time. From that perspective, yes, but recognising it, inevitably other issues can emerge, other concerns can emerge in the future. Of course, we would respond to that. Just as we have previously, obviously, this particular tax has seen quite a significant volume of legislation, both primary and secondary, in amendments since it was introduced. We will, of course, respond and we will seek to do so in a way that is as open and as transparent as possible through engagement. On the specific timelines around the issues that have been raised by the SPA, we will have that engagement with the authority and, as I say, more in-house to update the committee in due course as to where those conversations lead. Just in relation to some of the concerns that have been put before us, the Scottish Government is going to have on-going discussions with those groups individually about their concerns or is today should we pass it at the end of the matter for that discussion process? I would not want to say that this is the end of the matter. I think that, with all aspects of tax legislation, it is a process rather than just an event. Clearly, there has been a number of issues raised. There is always a challenge in having to balance and I appreciate those competing demands and not everyone can be satisfied without impacting upon another. On those broader points around transparency and about how user-friendly the presentation of legislation is and again touching on the point about an annual finance bill, I think that those are very important points. We want a tax system that is straightforward to use as possible and understanding the importance of that as well in relation to economic growth and providing certainty. That is why we are very keen to continue those conversations with public bodies and other authorities or with organisations such as ICAS, CIOT and the Law Society. Just a very quick point of clarification. I was really over the same lines as the convener's points on Police Scotland. Obviously, they have talked about the lack of exemption. As you will be aware, housing and access to housing, particularly in parts of my region, Highlands and Islands, is very difficult as a shortage. There have been a lot more suggestions that public bodies or could be providing houses to ensure that they can get the staff that they need, particularly in areas around the NHS. Would the exemptions that Police Scotland are not entitled to be entitled to those exemptions? Or would NHS housing also be entitled to those exemptions? The exemptions that are set out within the schedule are probably being amended. Schedules should be ordered by a leader who is specific to local authorities under the respect of housing acts 87 and 88. As to the situation with other public bodies, I do not represent what you want to comment on, Laura. As part of the review and the work around Police Scotland's submission, one thing that the Scottish Government also wants and is seeking to understand is the impact on similar organisations such as the NHS, the fire service for example, so it will be an all-encompassing. The fire service of the national body NHS boards are local, so are you aware whether they will be exempt at the moment? My understanding is that they would not be, but I am happy to go and clarify that point and write back to the committee. Clearly, that conversation has explored a wider range of issues around exemptions for public bodies. Clearly, if local authorities are exempt, should other public bodies be exempt as well, I think that we could start going through every public body one by one. What I suggest who would be helpful for the committee is to take that away, have further discussions and engage with housing colleagues and minister and write back to the committee to provide a broader overview of what the current landscape is and to provide clarity on the point that you raise and to set out the work that we will be doing to develop policy in this area. That would be very helpful for a lot of NHS boards that I speak to in my region. Staff shortages, access to housing is a big part of that. It is just how that would fit in and encouraging or supporting it. Thank you very much. That appears to have exhausted questions from the committee. Ross, you are just here to vote in time to vote if necessary. It forwarded some flooded roads this morning, but it took longer than the driver expected it would. We now turn to agenda item 2, which involves formal consideration of the motion on the instrument. I invite the minister to speak to and move S6M-11928, that the Finance and Public Administration Committee recommends that the land and buildings transaction tax, Miscellaneous Amendment Scotland, order 2024, draft be approved. I now put the question on the motion. The question is that motion S6M-11928 be agreed to. Are we all agreed? We are all agreed. I thank the minister and Laura Parker for their evidence today. We will publish her short report to the Parliament setting out her decision on the draft order in due course. I now suspend the meeting briefly to allow for a change of witnesses before we move on to the next agenda item. The next item on our agenda is to take evidence from the Scottish Government bill team in relation to the financial memorandum for the Agriculture and Rural Communities Scotland Bill. For this session, we are joined by Scottish Government officials, John Kerr, Deputy Director of Agriculture, Rural Policy Division, Mandy Callaghan, Deputy Director of Agriculture and Land Transition, Karen Morley, Head of Finance, Agriculture and Rural Economy and Ewn Scott, Branch Head, Agriculture Bill and Scottish Government. I would like to welcome you all to the meeting. I would also like to thank you for coming in earlier, our previous item finished a lot sooner than we had anticipated, so apologies for rushing in a wee bit earlier than scheduled. I now invite Mr John Kerr to make a brief opening statement. Thank you, convener. It is actually Ewn, the bill team leader who is going to give the opening statement. That is okay with you. No, that is absolutely fine. Okay, Mr Scott. So, as bill leader, I am co-ordinating a leader co-ordination team for the Agriculture and Rural Communities Bill, so I have got here today with me a couple of lead contributors to the financial memo. So, just a quick background on this bill. On 24 September, the Agriculture and Rural Communities Bill was introduced to Parliament, as you will know. The bill seeks the powers to deliver upon the Scottish Government's vision for agriculture, which was published in March 2022. The objectives of the bill seek to be the platform for measures that focus on the Scottish Government's key outcomes, which are high-quality food production, climate mitigation and adaption, nature restoration and wider rural development. So, collectively, that seeks to form a framework of support for agriculture, forestry and rural communities, and more generally. The powers sought in the bill deliver upon the broader outcomes of the aforementioned division for agriculture. The powers also sought to enable communities, sorry, outcomes related to forestry, food and drink, and rural communities and economy. In addition, it also provides the opportunity to modernise the powers of the Scottish ministers on areas relating to animal health and welfare, sorry, animal health and identification, welfare and plant health, and safeguard agriculture genetic resources of plants and animals. To support the delivery of the vision for agriculture, a new four-tiered support framework is being proposed. The bill provides the powers to deliver this four-tiered support. The primary framework does not provide the detail, as that would be restrictive and fail to provide the flexibility to respond to the change. The details of the tiered framework will therefore be provided in secondary legislation. Over the past two to three years, we have been building on the outputs of the farmer-led groups, the Agriculture Reform Implementation Oversight Board, or ARIOB, as it is known, which has supported and informed the development of the consultation and the proposals in the bill to replace the current CAP framework for agriculture and land use support. We ran a public consultation on the bill from 29 August until 5 December, in which we had 392 valid responses received in addition to a wide range of feedback from approximately 600 attendees of nine in-person events and five online events. Going forward, ministers are committed to working closely with stakeholders using the established co-production approach to developing future policy. The intention is for the published four-tiered support framework to continue to be developed with co-development and detailed measures with partners. Although the bill does not provide financial details on the four-tier system, it is intended that such a tier system will be utilised in the future, the costings have been provided on that basis in the financial memo. With the lead input from the ARP and the finance team, the finance memo makes reference to the existing budget support levels that are provided for under the current common agriculture policy and its associated support structure. Forecasting has been provided for the future support framework budgets against existing common agriculture pillars 1 and 2 and forestry grant budget allocations alongside other financial support provided to the sector that have also forecast from the enhancement of the bill. In addition to that, costings have been provided on existing Scottish administration alongside best available forecast transition costs to deliver a future support framework that can be made at this stage. The memo also sets out working financial assumptions for future programme against its proposed four tiers, which are based on the continuation of funding at the quantum heuritho available to Scotland through EU cap budgets. As the bill is a framework bill, which provides the future flexibility and adaptivity on how ministers may wish to provide support in the future, at this stage forecasting of a replacement programme is undertaken at a high level. However, future budget allocations are dependent on UK Government funding commitments, which are uncertain. We'd be happy to answer any questions that the committee may have. Thank you. Thank you very much for that opening statement, which is very helpful. Most of my questions will be on the actual financial memorandum itself, as opposed to the submissions that we have received. The law will touch on those as well. Indeed, some of the submissions have informed the questions that I will be asking. The first question is on the future support framework bill. Mr Scott, you touched on the fact that the bill does not provide details of four-tier systems and the visage that such a tier system will utilise in the future. Costing is provided on this basis. You want to talk about the mechanism of providing a level of continuity, but, at the same time, you are looking at flexibility. One or two of our submissions have said that there is a kind of contradiction in that. Maybe just bring John in. Thank you, convener. The bill sets out to provide the powers to enable us to take a flexible approach in due course, at least to be framed around the ability for future ministers to take different decisions. We have set out the way that we intend to use the four-tier framework within the powers of the bill. We have also set out that we anticipate providing a similar level of support subject to the availability of funding, which you mentioned in his opening statement from the UK Government, with no cliff edges for producers. We have the flexibility to transition, but we also have the ability to do that over a period of time to provide that continuity. Rather than there being a contradiction in those two things, it is being able to do the flexibility over time but to introduce it in a way that is at the right pace for the industry to be able to come with us. In paragraph 15, you have said that it will provide a platform to build momentum for private sector green finance investment. We are offering financial support, explicitly linked to action for nature and climate on farms and crofts. We should not give the land manager a confidence to engage with private market investment in the future, sorry, in nature. A lot of the submissions are saying the fact that what the financial memorand does is bed invested interest in the status quo. For example, we have received a number of submissions. RSPB is the one in front of me, but four or five are almost the same, which says that the bottom 40 per cent of recipients only receive 4.8 per cent of the budget, i.e. the larger businesses get most of the income support. If you look at LFA payments, they are not connected in any meaningful way to income and profitability. Farm business income data suggests, for example, only 23 per cent of LFA, that is less favoured areas, sorry, I should have said. Cattle business have an income greater than zero without support payments compared to 82 per cent of general cropping farms, for example, which make a profit without support. One could suggest that the bill continues with the status quo whereby LFA payments are made on land rather than what is happening on that land in terms of achieving some of the objections that the bill supposedly tends to achieve. It is true to say that the current system is based on area-based payments, which means that those with more land receive larger payments, slightly complicated by the fact that we divide our land into three different payment regions. Arbal or improved land has the highest payment rate, so cropping farms, as you mentioned, would receive the highest rate per hectare, whereas the most extensively grazed parts of rough grazing in Scotland receive a much lower rate, so even quite large areas of land may receive a relatively small payment. The LFA scheme works slightly independently of the three regions, but it is the case that there are a large number of small farms that receive a proportionally smaller amount of payment each and in total. Of course, the bill provides us with the powers to look at whether we should have an upper threshold on the payments received by anyone business, according to whatever criteria we might want to set out or ministers might want to set out in future, including a cap on the total amount of the payment. There is the ability to move away from the current system rather than to embed it in, and ministers have set out their wish to do that in a measured way, so as to prevent no cliff edges to any particular businesses or in general. I do not think that there is a contradiction between those two things, and it is a matter for future ministerial decisions at the pace at which we seek to transition. In terms of financial memorandum, it is almost clear that the money that will be actually available for financial support to the sector will be in tablets of stone, so that, in 2324, right through 2027-28, you are looking at exactly the same funding levels, so £741.9 million. Clearly, the financial memorandum is already out of date, because what we have seen is in the current financial year, the actual funding, according to page 94 of the Scottish budget, 2425, is £738.9 million, and that drops to £705.7 million, so that is a 4.5 per cent decrease. Does that knock a wee bit of a hole in the financial memorandum? Specifically, on page 96 of the Scottish budget, if we look at the money for woodland grants initiative that has been raised in the chamber, on several occasions again, you are looking to hold the amount of money that is being invested in that area at £77.2 million, which is the current figure this year. However, in next year's budget, it is already looking at a decline to £45.4 million, which is considerable decline. How can we have faith in the figures going forward over a period of five years when, in the current budget that we are about to vote on over the next month, there are already significant changes to the sums in the memorandum? It is absolutely correct to say that the figures published in the financial memorandum were based on the best forecast that we could make at the time, which was in September, which is when it was submitted to the Parliament, which, of course, was in advance of the current budget process. As you say, the budget itself is currently going through the Parliament, so it would be—to update the finance memo at this time—not the right thing to do until we see the outcome of the budget process, but it is also true to say that ministers across Government had to make challenging decisions, which they have stated publicly in terms of the budget allocation. The forward cast of the 23-24 budget was the best basis on which to produce the financial memorandum, which is what Yoon set out in his opening remarks. That was the best available information to officials at the time. Of course, the budget position has shifted since then, so in some of the budget lines that are mentioned in the financial memo, there have been movements, including the forestry grants scheme, which the convener mentioned. That is all the case. Nevertheless, the intention is for the Scottish Government to continue to support the sector with the funds available, which, until the end of the UK Parliament, are to be retained at much the quantum that they are at present, and thereafter we do not know, because that will be subject to treasuray decisions beyond the next UK election. That is a matter of real concern. In paragraph 23, you have said, and it has already been touched on by Mr Scott, that EU exit means Scotland no longer is long-term set into funding. HM Treasury should have provided yearly allocations for the current UK parliamentary term, however there is no funding commitment from 2025 in that it requires funding certainty. Given the fact that there has been no commitment beyond 2025 in this parliamentary term, where are we in terms of providing some certainty through this financial memorandum for Scotland in this bill for our agricultural sector? We have already seen a knock in the next financial year. What is the likelihood that that will be exacerbated in further memory? You cannot get a crystal ball, but what are your concerns on that and what are the likely parameters that should be not seen at a commitment beyond 2025? It is important that we remember that the bill here is to provide the Scottish ministers and the Scottish Government with the appropriate powers to support the sector and achieve the objectives that are set out in the purposes in the bill, but it does not set the budget, the budget is set through the budget setting process. That principally requires us to reach a settlement across agriculture in the UK in terms of all the devolved administrations or the UK administrations receiving an appropriate level of funding for the agricultural land-based sector. In terms of support, the bill review explicitly recommended that there be a revised settlement across the four administrations to take account of what the policy is currently trying to deliver across all of the administrations in the UK, not just in Scotland. To date, we have not had any meaningful discussion with Treasury and the other administrations, although we continue to seek those discussions with our counterparts across the other three countries. I did some of our colleagues in the other administrations that are doing likewise with Treasury, nevertheless we are where we are, and we can only continue to press as we are doing. Okay, thank you. The National Farmers Union seems to be fairly happy with the financial memorandum, for example, but other organisations such as Land Workers Alliance are unhappy, stating that the continuation of area-based direct payments constitutes, and I quote, an unacceptable use of public funds. As I have talked earlier on about, it is a maintenance of the status quo and one could argue vested interests. What discussions is the Scottish Government having with organisations, some of whom feel that they were not actively consulted by the Scottish Government, in terms of looking at how we can deliver the best possible outcome in Scotland's agriculture and rural communities in terms of what the Scottish Government's objectives are? As you said earlier on, we have undertaken a broad consultation, both the Scottish Government consultation, and we also sought the help of Nourish Scotland to do a more community-focused round of consultation discussions. That was a public offering, and people did participate. We had good participation across the consultations. We are also individually met with stakeholder bodies, including the Land Workers Alliance, which we discussed, who held a rally outside the building. We met them at that time, and separately, to hear their concerns. They would like to see more support for small producers and small enterprises, which can often supply quite significant quantities of food from quite small areas. That forms the basis of their critique of an area-based system. We recognise that, and, indeed, we are running a small producers pilot scheme to assess how we better assist those producers using smaller businesses, including those in the Crofting Counties with polytunnels. We have available support to small producers at present. We do not have to be a large producer to access the support available from the Scottish Government currently, but we recognise that there is potentially more that we could do there, and we are currently piloting that. The powers within the bill would provide for more of that type of support to be rolled out in future, should ministers so choose? The RSPB has around 83,000 hectares of land, and much of it, of course, has agriculture activities on it. It has said that, historically, the common agricultural policies performed poorly in terms of directing spending appropriately and offered best value for money. If we go forward, we should really be looking at cost benefits. What they are saying is that there has not really been any alternative approaches, and they have seen nothing from the Scottish Government that suggests that cost-benefit analysis of a range of reform options has ever been undertaken. Again, as I have mentioned a couple of times, it looks like a steady should-go is financial memorandum that we are looking at well. We have got an opportunity to make significant changes here. Let us look at where we get the best value for money. Has what works been undertaken to see that we are getting the best bang for our agricultural buck, given the commitments that we need to fulfil in the years ahead, not least on the climate? The thing that we have set out in parallel with the bill process is our four-tiered structure that is proposed to be implemented by the powers and the bill and the secretary of legislation that will follow. That sets out that we will continue with a base payment system similar to what we have at the moment with some of the basic payment scheme budget attached to it, but we intend to bring in a second-tier structure where everyone will have access to that money if they wish to undertake the measures that are set out in that second tier. That is where we anticipate that the line share of the work will be done in terms of climate and nature outcomes, while still supporting food producers who are managing the land to get those additional outcomes, which is new. That is something that will be different to what we have at present, and it will be broad-reaching, so it will be different to our current agri-environment support in the sense that that is more targeted with a limited budget. The second tier of our framework is where we anticipate the benefits that are being realised. We are currently going through the development work of that, and very much at the heart of that, is establishing which interventions will deliver the most value in terms of reducing emissions and promoting on-farm nature recovery and restoration. That work is on-going, and the third element of that will be having the right monitoring and monitoring and evaluation sitting behind it so that we can check as we go that we are getting the right bang for our buck, as you put it. What do you say to comment that, and I quote, we do not see the logic of area-based payments, payments that do little more than reward land ownership and inflate land values? There is a criticism that is valid about the area-based support system, which does not closely link to the agricultural output. An output-based subsidy would be a WTO amber box. We have stepped away from that, and the European Union absolutely wanted to reduce and decouple the link with productivity, so that it would prevent perverse incentives of overstocking and overproduction. That is why we have got to the position that we have evolved to today. Going forward, if we want to deliver more benefit, it is also true that some of those benefits scale with the land that the benefits are delivered across. If you want to restore riparian woodland, for example, and if you are a large estate, you have more potential to deliver more of that value to the public. It makes sense that some of our support should be linked to the area that those interventions are delivered across, because they scale with it. Similarly, if you want to reduce emissions from the beef herd, the largest producers have potentially got the most to contribute there in terms of emission reduction. It is true that we would want to keep some of that link with scale, because we want to deliver some of those public benefits at scale, too. One of the issues that has come up is the cost of administration. Pagar 47 of the financial memorandum says, The £23.24 budget cost to administer payment compliance and support services is £61 million. That represents approximately 11 per cent of the £692 million budget for all current schemes. Marathmatig says that under 9 per cent of that is £61 million, so there is a wee error there. More importantly, in terms of the issue, future administrative costs under the proposed future framework support are currently unclear and will depend on the chosen delivery model. The £61 million is a lot of money for administration, so I wonder if you can fill us in on what that £61 million would be spent on specifically and why it is unclear. The £61 million is a combination of the IT and the whole IT system that sits behind it, and what we call the paying agency, the RPID staff that administer and support farmers to go through that process. As part of the programme of work, supporting a transition away from where we are at the moment to fulfilling the framework and delivering a more flexible process that can respond to the future in a way that the current structures are very settled, I suppose, is developing a business case that sets out the different options for operational delivery. That £61 million has been built up over a number of years, different schemes added at different times, so all of those things have to be administered as has been done through the EU. We are looking now at what are the operational delivery options, which might be more streamlined and simpler to administer. We have not gone through all of those options yet, and that is part of the work that we are doing at the moment in developing the business case for how operational delivery will work under the new framework and following that. How did you come to figure a £61 million then, given that there is so much that is unclear and is still being worked on? Those costs are the current administration, so it is the cost of the IT system. There is a lot of support in the IT system because there are a number of different systems that support that. We have the staffing costs across RPID, the regional offices, so it is a total cost at the moment. I appreciate it, but it seems to be steady as she goes. Is there no thought towards how that administration cost can perhaps be reduced so that, for example, more money can be invested in agriculture directly itself and in innovation and in climate production? It seems to me that this is an excellent opportunity to make changes to reduce bureaucracy, improve efficiency and delivery. I am a bit disappointed that we said, well, we will just keep the money the same. It does not seem to be an ambition to try and reduce that even by 5, 10, 15 or 20 per cent. As we have seen in the overall budget in the next financial years, we are looking at a 4.5 per cent reduction, yet there does not seem to be any consideration here for our reduction in admin. There is work going on doing exactly that with the current, so it is that point about building the plane while we are flying it. There are efficiencies being made within those processes now, but we have not yet got the structure of what the future administration will look like. It would be the intention for that to be more efficient than it is at the moment. When will we have that? It seems to me that, again, we are in a kind of groundhog day in this committee whereby we keep getting these financial memorandums. I know that this is the only one that is your responsibility. I apologise for this generalised moan, but generally we are getting these framework bills where we are always having to ask questions about future resources and how they are going to be funded and what the second legislation is going to look like. When are we going to be in a position whereby the issues in relation to administration are no longer, to quote your own financial memorandum, unclear? We are working through the business case at the moment. Again, last 90 minutes, how long is a piece of string? Is there a date being set when this is going to be resolved or is there just going to be one of these things that meanders on for weeks, months, possibly years? It is important to recognise that the future delivery cost will be dependent on what types of support ministers at any given moment choose to take forward. One of the issues that we have to wrestle with is that the more we want to accommodate each particular type of agriculture, the more detail and complex the policy needs to be, the more complex that needs to attract cost. There will be a point at which we have to take a decision. Ministers will ultimately have to take a decision about how much complexity we want in order to accommodate different types of businesses and where we want to stop doing that in order to make the delivery costs reasonable for the total amount of public benefit that you will get for exchange. We are working through that process and what we have committed to do rightly is to work with the sector to establish what is possible in terms of getting the right measures in all the tiers. Then we have to take a view about what the delivery implications of that are and then come to a position about what the final settled policy would be. That process is still on-going and will continue to be on-going as we work through the transition and we envisage that while our published route map goes to 2027 and beyond. Some of those questions will not be known for some time to come. It is a permanent state of improvement that would be a perhaps a better way to put it from my perspective. Indeed, just that revolution evokes chaos and stuff like that. I always think that if you have a goal and a task, it is a lot easier to reach and if you do not have a goal and a task with a deadline, then it is a lot harder to reach because there is never any date at which there has to be a delivery. I will allow others to come in now. The first member to come in with questions is Jamie to be followed by Ross. Thanks very much, convener. Can I just remind committee of my registered interest as a partner in a farming business and a member of the Royal Highland Agricultural Society, SLE and NFUS as well? Just on that point that the convener is making, I think it's, as he said, it's a frustration for all of us that we get framework bills and there's a lot of talk about co-design and that things are going to change, but that makes it extremely difficult to know exactly how we're scrutinising. Just to clarify, the tier system that you're operating at the moment, the plans are for four tiers. Some of those tiers will be more costly, I imagine, to administer and to, for example, tier two requires perhaps more monitoring and evaluation than tier one, so when do you think you'll get an idea of firstly the structure and the emphasis put on each tier? In the route map, we set out that we intend to introduce the first iteration of the tier two support in 2026, so we should be, and we are, working towards getting the shape of that ready to then talk to farmers about it in the coming, you know, six to eight, 12 months, let's say. There's quite a lot of work to be done there, hence my slight hesitancy around that, but our current plan is to have that in place by 2026, with guidance available to farmers in advance of that. At that point, we should have a good sense of what the delivery costs are for that tier. Is tier two the one tier that possibly has the most variable costs associated with it? Not necessarily. I think it's the piece of our policy that's the most new and different from where we are presently, depending on how we implement it. Whereas the other tiers, we have a reasonably established current approach, which will be relatively similar, albeit the room, as Mandy has said, to hopefully simplify and reduce some of the administrative burden of that, both for our point of view as the paying agency and also towards farmers, so it's that second tier is the one where we see the greatest uncertainty, though at this moment we're trying to narrow that down to something much more controlled and known. Okay, at the Rural Affairs Committee last week, Professor Thomson of the Scottish Rural College said a rural support plan needs to be front and centre. Douglas Bell of the Scottish Tenant Farmers Association said earlier that, referring to a rural support plan, the earlier that can come, the better. There is a real frustration of agricultural stakeholders just now about working in a vacuum. The UK Government were able to provide a clarity in terms of their vision for agriculture and a UK agriculture bill back in 2021. We're left with a framework bill and an approach that the DPLR said poses difficulties for scrutiny. Would you agree with that? And why haven't we been able to get a clearer vision already if we're not going to be getting anything until 2025? I think it's right that the rural support plan would be an important document for the industry to be able to plan from. However, I would also say that we have set out the Scottish Government's vision for agriculture really clearly in terms of what the objectives are and they are also set out on the face of the bill itself. The objectives aren't the plan. As a committee that has to look at the cost implications, we're looking at aims and objectives rather than actual plans. That is right, but the other thing that we've done, and I think it's important, is that we've set out the vision for our four-tiered structure of payments and that we've also set out the timeline under which we expect to implement those. As I said earlier, it's difficult for us as officials to plan for future budgets that are uncertain, so the industry would like to have that certainty for budget planning purposes. The Scottish Government agrees with that and continues to press for that clarity. I think that it's important to remember that agriculture has come from a place where the European Union's process was to have a seven-year programme, so a funding envelope that lasted across that period and there was flexibility to use that money and anything that wasn't to be paid out early in the process could be paid out later in the process. That has currently gone from UK agriculture, that type of support. That planning element, we share some of the frustrations of the industry around that, but I think we've been as clear as we can be while still committing to that spirit of co-development with the industry of what the individual measures within each tier should be. We are balancing those two questions. I take that up a bit. Still, the actual plan for agriculture, the road support plan, will be five years later than it's taken to the UK Government to deliver it. It is important for nine other cost star. I would say that we've been really clear with the industry about where we currently are, where we're going to be shortly and our long-term vision. I would dispute that we're in anything other than as good a place as farmers' side of the border. Just last point on this section, on this area, DPRR committee has asked that you consider publishing a road support plan before stage three. Colleagues that are working very hard on various aspects of that, so I'm reluctant to tie our hands. In any case, it would be for ministers to decide when we bring that forward. As I say, I think that the vision for agriculture combined with our route map is nine-tenths of our plan. Some of the extra elements that will go into that are under development right now. I'm just for clarity's purposes. You're not rolling it out, but do you think that it's unlikely? It's not really for me to say that it would be for ministers to connect to. Okay. Just looking at some of the other areas, I just wanted a bit of an idea. Within the current system and also within the framework bill, what will happen to underspend on a yearly basis? Will that have to remain within the sector? Can that go in and out of the budget as it does now? As I mentioned a moment ago, previously the European Union cap had a specific mechanism for us to be able to draw down moneys flexibly across particularly the pillar two part of the former EU programme, and that situation has gone. In terms of the financial arrangements, perhaps I would defer to Karen to say something about that. Thanks, John. It's true that the Scottish Government has taken underspends from the budgets in year to meet other pressures across the Scottish Government. The commitment to return that funding to the sector in future is purely one that ministers have taken within the Scottish Government. It's not linked to anything related to the Westminster funding, and it recognises that the overarching difficult position that the Scottish Government has had to try and manage. That's all been discussed in the public domain through Parliament questions as well, so I'm not really going to get any further into that. But as long as we have single year budgets, we should expect to live within each annual settlement and the prospect of deferring funding into a future year should be done from the perspective of a planned future commitment rather than an emerging underspend that creates a liability in the next year. Unfortunately, that's just the constraints that we're working with annual budgets. Whether there's any appetite to change or opportunity for ministers to change within the Scottish budget perspective to give multi-year funding, I don't know, but we plan across multi-years for administrative purposes, but we can only deliver bound within the constraints of the annual budget setting that we have. I appreciate that, but obviously at the moment money can come out of the budget. It can or can be withheld and used elsewhere. Promises from politicians, I'm sure there are, if I take my politicians hat off and put my farmers hat on, they're not always worth a huge amount. There's nothing within this approach because we always look at the additional cost of legislation, but there could be areas where, depending on how decisions are taken as part of filling out of the framework, there could be areas where underspend can still be utilised outwith the agriculture budget. That's the ministerial priority, as we've seen this year. As a part of the administration, we are duty bound to not sit on pots of money that we can't spend when other parts of the administration are really struggling. We've got to be fair to our colleagues on that a little bit, I think, as well, but we do plan for delivering within the remit of what our ministers are asking us to deliver as best we can. Thank you. I've got two other brief areas. One was around EU alignment. The EU plan, which I think, as you said, the new plan is seven years, it's going to see, as we're seeing, from protests across Europe. It's going to see budgets cut. Obviously, this is an opportunity in the Scottish context to look for a new plan for Scotland. I take it that our EU alignment isn't going to go as far as that. Seeking the powers that we've set out to align with the outcomes that the European policy also wants to reach, we're really clear about wanting to maintain food production, we're really clear about wanting to deliver on environmental goals, and we're really clear about wanting to continue to support thriving rural communities. That broadly is in line with what the European Union wants to do as well. You mentioned the protests in different European countries, currently in France, in the most obvious of those, and I think that their farmers are not so much, so it's a complex picture, but principally they're protesting about the lack of market return for the type of farming that European citizens want to see their farmers undertaking, and that's partly policy driven and partly market standards driven. It's not only about the support payments, which is what the bill more or less talks about, but also some of the conditions attached to that in terms of environmental performance, and farmers in Europe seeing it as we're doing all this hard work, and then consumers go to the supermarket and buy something from a country that is doing that. Just lastly on that EU alignment point, the new cap scheme, I understand, requires reserves to be kept for crisis, as some of the issues that we've seen. Is that something that would be built into this or envisioned for this legislation when the framework is fleshed out? How would that reserve be built up? The crisis reserve is much more meaningful when you're 28 member states and you can amount a reasonably large reserve. Smaller countries have much less ability to deal with a crisis in perhaps one small territory from the 28 member states, so whether or not we can meaningfully put together a crisis reserve that would help is a point. It's not being considered though, at the moment. It is a point that we have considered, and I would need to just check, but I think it is in the bill. Just to comment on that, there are powers within the proposed bill that would enable us to utilise funds in that manner. How would that be funded, and what would you envision that to be? The bill is silent on that, but there's a flexibility and I think that that would be for ministers to decide. There could be money being taken out of the agricultural body to hold in reserves. Those reserves would be only for agricultural use, could they be utilised again outwith that budget line? As I said, the bill isn't drawn on that and that's a decision that would be for ministers to make in due course. You could appreciate why we're being asked to make a decision on the financial memorandum of the bill and there's a lot of uncertainty here on how the money that we all appreciate is limited is going to be used. I think that the reason that I prefaced my answer with the situation in Europe with the crisis reserve is because it's really important that the context is right. As you pointed out, we've got a reasonably modest Scotland-sized budget to support if we have a significant crisis, then finding the money from that budget is going to take it from other recipients. It's not the intention for us to have to do that, but whenever you're facing a crisis, you have to treat it on its merits at the time. That would be a decision for ministers. What we have done and what's important is that we've taken the powers to enable ministers to support the sector in the time of crisis. As we did this year in terms of repairing flood banks, we've made sure to have the powers to allow ministers to provide that support. The finding of the money is a slightly separate issue, albeit the one that you've focused on here at Wightland. Okay, I'll put a bit now. Thank you very much, Ross. We've followed by John. Thank you. Excuse me. I'll try that again. Thanks, convener. I'd like to get a little bit of clarity on some of the stuff that the convener touched on in his original line of questioning around the balance of funding allocation between tier 1 and tier 2 and above. If you look through the consultation—the evidence submitted to the committee but also consultation responses—I think that it's fair to say that a number of the organisations that have submitted evidence to us have made an assumption about that and have objected to it, and others have stated that they felt it was ambiguous. Just for clarity, the financial memorandum—I think it's paragraph 21—and I'll be paraphrasing slightly—in broad terms, the Government intends to maintain underpinning support through brace payments tier 1 and universally accessible support for land managers undertaking climate and nature actions through the enhanced mechanism tier 2. To do so at similar levels to current direct support, some of the organisations that have submitted evidence to us have read that in two different ways. Some folk have read it as the individual payments will be roughly similar to the level of payment that they are now, with new conditions, capping, etc. Others have read it as the overall balance of budget allocation between the amount of money given to tier 1 and tier 2 and above will stay roughly as it is at the moment. Could you clarify which of those readings is correct? I can't, because that's subject to future decisions of ministers. It will be for ministers to decide what the split of the budget is between the four tiers in due course. We hope to set that out clearly for businesses in the run-up to the implementation of the 2026 iteration of the scheme when we hope to bring in tier 2. What we set out in the bill consultation was that we anticipated that the levels in tiers 1 and 2, which are the reaches of everybody who wants to participate, would be broadly similar to what we currently have in the income support part of our current policy, at least at the early part of the transition. Ministers have committed to no-cliff edges. In order to meet that, we would want to not drastically reduce anybody's access to the payments that they currently receive, though that may change over time. We have also been really clear that we expect businesses to be doing more for that money because of the tier 2 element of that, requiring more specific outcomes for nature and for climate of those that are producing our food. We have set out that we broadly anticipate, at the start of the process, that the income support element of the budget tiers 1 and 2 is being similar to what it is now, which would be BPS, greening and possibly the elf last payment. Tier 2 has more of the conditionality around climate, nature, restoration etc. I mean, correct me from wrong, at the moment, the vast majority of funding goes through tier 1, which is largely unconditioned. The tension that has come out and a lot of the evidence that has been submitted to us is how do you square the circle between the ministerial commitment that you mentioned around no cliff edge with other ministerial commitments for transformation in agriculture, that is what is in the vision statement, and the statutory targets that we have around climate and emissions reduction, the statutory targets that we are soon going to have around nature. It seems very hard for me to square what is in this FFM and the bill with other commitments that ministers have made and other legislative commitments that are already in place, because certainly, at least in the short to medium term, there is not going to be a significant shift in funding here and therefore what is proposed here is not going to result in that shift towards lower emissions, more restoration of nature etc that the Government has already committed to and that Parliament has already put in law. So, to a couple of points to pick up there. First of all, basic payments are conditioned, so at the moment in order to receive a basic payment, so any form of income support, farmers have to comply with good agricultural and environmental condition, the geek rules, and they also have to abide by statutory management requirements. So those are meaningful things that prevent harms happening in the environment and underpin the conditions. Sorry to cut across, you've got to acknowledge that they don't improve the situation. Where we are at the moment is Scotland is a massively ecologically degraded country with significant net contribution to global climate change. We recognise something needs to change. It's not really good enough to say that the basic payments at the moment are conditioned on not making things much worse, because the status quo, we've all agreed, the Parliament's agreed, the Government's agreed, the sector's agreed, the status quo isn't good enough, so the conditions for the basic payments, that doesn't really fly, does it? I think it's fair to say that the farmers that would talk to us recognise those conditions as being meaningful, but your point about needing to make improvements is right, and that is why we've got the tier 2 of our proposed framework is going to deliver more of the environmental benefits that are needed. You're right that the farming sector also recognises that they are needed and they want to contribute to that, so that's where the budget will make more difference than the current income support budget does. At the moment, we have a greening policy, which largely impacts on the arable and improved land, but it doesn't reach all of the grazed land, so that rougher grazing. There is room for us to bring in more conditions for all farmers, but in particular those that are not caught by a current greening policy in tier 2, and that's where we see that improvement being driven by that part of the policy. At the moment, there's no current intention for tier 2 to become a larger share of the overall budget. As you've laid out, tier 1, essentially, for the purposes of this conversation, prevents things from getting worse. There's conditions in there to prevent further environmental degradation, but it's not about improvement of such. Tier 2 is about improvement, but what we've got in front of us doesn't give any indication that tier 2 is going to become a larger share of the overall budget. For the sake of our agreement, if we put the greening conditions into what's currently income support in tier 1 and then we introduce a new tier, tier 2, and take some of the current income support budget and put it all into that tier 2, then that will take some of the budget that's currently just got the current conditions and put it into this entirely new platform, which will then drive the changes. That's what our policy is predicated on. It essentially takes the existing money and gets it to do more than it's currently doing. That's useful. You can see the challenge for us, though, going back to what the convener said. Those decisions will all be made at a much later date. They are not what we are looking at now, but we are being asked to scrutinise what's in front of us. The challenge that I've got is what I'm looking at in front of me doesn't give me any confidence because it leaves a blank space in this area that this bill and the Government's financial assumptions around it will contribute towards statutory climate targets that we already have. Never mind the nature targets that we're likely going to put in statute, the policy objectives that the Government's got, et cetera. How have you gone about engaging with the Government team who are leading on the development of the climate plan, for example, to make sure that this bill is pointed in the same direction as statutory climate targets in the act, but the plan that's being produced for later this year? I'm glad you asked the question that way. In my division, we have a group of staff whose function it is to ensure that the agriculture policy is aligned to the climate change plan. Indeed, the work that will go into the future climate change plan for the agriculture sector is being worked up by my team. That team is then working with the agriculture reform programme to ensure that we've got an implementable mechanism to take that forward in the support structure. Some of the new conditions will come forward in advance of the bill powers in 2025, so we'll use existing powers to bring forward new conditions, which help to tackle the climate crisis specifically. We anticipate bringing forward new conditions for the circular beef support scheme in order to try and reduce emissions from that sector. We also have some underpinning elements across all of agriculture to help to get businesses ready to baseline their activities. Many of them are already doing that, but we intend to bring that in as a condition for everyone in order to tackle exactly the challenges that you're raising, both on nature and on climate. Just final, it's been very useful. Have you had exactly that kind of conversation with all the organisations? I'm sure that you've engaged with through the bill process, but the likes of RSPB, Nourish and the Land Workers Alliance have all given incredibly similar submissions to the committee on exactly that point. Have you already started engaging them in a discussion to explain? In some cases, it sounds like all that's needed is clarification. In other cases, there's disagreement over policy intention, which is fine, but have you engaged them to clarify some of those points? Yes, so the agricultural reform implementation oversight board, Ariob, does contain voices from Nourish and RSPB as well as, of course, the farming sector across the different sectors, so crofters as well as large livestock farmers and arable farmers. So I think we have got a good balance and we also engage individually with those organisations at official level but also at ministerial level. So I think we've been taking advice at an input from across the whole sector. Thanks, Rach. That was really useful. Thank you. John Tuford by Michelle. Thanks very much, convener. If I could maybe return to some of the convener's questioning around the administration costs, particularly in the financial memorandum in paragraph 47, this figure of £61 million. I was a little bit unclear about the 11 per cent, what was that 61 million, 11 per cent of? So in the financial memorandum, it says that the 2023-24 budget cost to administrators was compliant. Is there a sense properly? Okay, so that's 11 per cent of the total budget of the schemes that are supported by that administration. I'll say that again in a coherent way. We pay out money to farmers through our support schemes and to do so costs us administration costs. The money that we pay out is £692 million and the administration costs to do that are 61 million. That would be less than 10 per cent. Well, there you go. My answer is no right. It's a bit off to have a financial memorandum, which is an obvious error, as that I would have thought. Well, I just wondered if it was referring to a different figure if I was misreading it. Okay, I'll leave that with you. I mean, it'd be good if it's less than 10 per cent, I suppose. We'll check that. Because my next question would be, you know, is the 11 per cent a reasonable figure? I don't know, do you benchmark that with, say, other countries? I mean, I don't know what the Denmark spend, what does anyone spend. Just for example, last week at Social Security Committee, Social Security Scotland are aiming at 5.2 per cent for their costs of distributing benefits, which is also quite complex in the area. That was Social Security Scotland, that big part. And they were at 5.2 per cent. So I just wonder where, you know, is the 11 per cent okay? Is it good? How do we judge that? First of all, apologies for the fact that the figures on the face of it don't appear to be correct. But in the defence of colleagues who've prepared this document, the amount that we pay out depends which bit of it that you measure. So whether we include the forestry grants and various other pieces at the margins, the agriculture policy is quite broad in that sense. In terms of the cost to pay and benchmarking, as I said earlier on, the amount that it will cost to pay out will be dependent on the complexity and ministers' appetite to accommodate more things in the policy. And so it's unfair to compare it with Social Security, which is a larger volume and less bespoke things. But I can feel that Mandy wants to come in, so I'll stop there. I'd also say that, obviously, there is a core cost of the administration irrespective of how much grant there would be, actually. So if the budget were to change significantly, then the cost of administration, there's a core cost for staff and IT that doesn't change. So there's a sort of per-transaction value that, again, we're examining what good value for money looks like. And in the examination of the business case and what a structure for administration of the future framework could look like that would be more efficient or better value for money, that spectrum of potential budget is an important part of thinking that through. And we have got specialists looking at the figures and trying to look at different scenarios depending on what happens. So even if you paid out no grants, there would still be a core cost? Yeah, I mean, I guess at the point of you paying out no grants, you wouldn't have, you wouldn't bother maintaining that. But yes, like if the budget was to reduce to a quarter of what it was, that percentage of the total cost would obviously go up a lot because there are set costs no matter what the grant is. Sorry, that was a little unfair of me. And is that, I think you're saying that that is a factor, one of the factors when you look at how we might go forward, that if a grant, if one particular scheme is, you know, could be run quite easily as compared to another scheme which would be very complex to run, that the cost of administration would be a factor that you would take into account? Yeah, and the benefits. So benefits versus costs. So at that point, we do need to look at what is it giving, not just in terms of financial value, but also the value against meeting the targets around climate change by diversity, et cetera. So it's the benefits versus the cost. So when making decisions about the complexity of something, every time there's complexity added, there's cost added. So you need to know that that complexity is worth the cost. So those are all part of the decisions that ministers will have to make on individual elements and decisions as we go forward. Okay, thank you. Now, kind of linked to that, in paragraph 56, it talks about the transition costs, which are to be £64 million. So that's going to one-off, I'm assuming, that what will happen over a period but won't be repeated. And then it goes on to say in the following paragraph about implementation costs, which are not included. It says that those costs are currently excluded. So first of all, can you explain to me the difference between transition costs and implementation costs, and then also why the implementation costs are excluded? The transition costs, again, at the moment because we are still working through, and that's why these aren't precise, the estimated cost, because we're still working through what the structure could be and what is value for money, what systems do you need, what can be repurposed from here. So the transition is that the implementation would be around, because we're building the plane while flying it, it's not a simple equation. If we were doing this from scratch, we would be able to know how much something costs, but this is the difference between what we currently pay and what we might pay in the future. So we may find that implementation costs could go down as well as up, so at the moment we are still working through what the operationalising of implementation would be. So that would be, there will be some costs associated with the transition, additional staff and programme costs and we're looking at IT and those kind of things as well, so that's an estimate of that. But there isn't an estimate for implementation costs. I think, as I said, it's because we don't know that there will be increased costs associated with implementation. So the programme as it is at the moment is about transformation of where we are to where we need to be, and then it would be subsumed back into the business as usual. So in an ideal world, and I can't commit to that because there's too many don't knows, but in an ideal world that on-going implementation and delivery may, because you've made something more streamlined depending on what choices are made, could be less or more, and that's why that's been excluded. So although it says that it's been excluded effectively, it's assuming that the present costs will basically carry on roughly as they are, is that fair? Yes, and being valued for money is at the heart of what we are considering in terms of that benefit and cost analysis. So in an ideal world you're not looking to increase the administration costs from where they are now in the longer term. Okay, thanks. Now you mentioned IT there and in paragraph 62 you refer back to last time there was significant IT modernisation and business change and the figure of £178 million, and in fact it says it did not deliver all the aims and benefits originally envisaged. So where are we with IT in all of this? The current setup is a complex one with multiple systems. So again as we look into what our target operating model for the end point would be, it would certainly be the intention to streamline and simplify where we are at the moment, and some of these systems have just been built up over a number of years and added to over time. So it's quite a complex picture. So that provides this bill and the transformation provides a real opportunity to streamline and improve the situation that's at the moment. And might that include more IT investment? Again this is sort of subject to the decisions that need to be taken about what is value for money and what's not, but the option of additional or changed IT will be part of the business case, but also looking at repurposing what is currently there. So I'm certainly not the IT lead in this space so it's quite technical and complex, but there is streamlining and improvements that will be needed to go forward to make this a system. So for example being able to take advantage of new technologies will being more flexible as science improves and things like that are all part of an overall target operating model of processes and systems that can respond to those kind of things. And a lot of that does need transformation. I mean I'm assuming that if you tweak the present system then the IT systems could probably cope with it, but if you do something radically different we might need a very new system. Those are the assessments that are being done each time we're looking at the different things you know to what extent the current system can be used to what extent new things may need to be bought. That's all part of this business case and a benefits cost analysis. If I might just add a little bit more I think it would be fair to say and I think our IT colleagues would want this said that any system with any longevity to it requires on-going investment to keep it current. So I think that any of us who are involved in supporting the sectors need to make sure that our systems are kept current. So I think that on-going investment of your IT is always going to be something that will accrue at least some cost in terms of the financial implications. I think that that would probably be true with or without these policy changes so even if we hadn't left the EU and this wasn't a thing that would still be true. So is that in your budget for the coming year? Yes. The IT refresh or whatever? Yes. Mr Halcro Johnston previously referred to the crisis reserve. Is that the same as the national reserve that I see referred to? No. The national reserve deals with the way that we manage entitlements. It's a quite complex area so I hope that you haven't got follow-up questions in that. The national reserve allows us to take in and then issue entitlements for a payment and using the national reserve to bring in new entrants is one of the things that of course we want to continue to be able to do. Right, because I don't think that the national reserve is referred to in the policy or financial memorandum although it had been in the consultation. So in that sense it's got to do with whether or not you've got an entitlement to access money rather than money itself but I'm straying into territory which is quite technical and I'm not very sure of my fate. Okay, well I'll leave it. I mean if you want to write to us. The next item was to say anything, no. No, it's okay. I'm an outsider to this so it's just intrigued. And my final point was on the question of costs for other organisations, I think it was the SRUC suggested that farms would have to produce whole farm plans and there would be a cost to that. Is that, would you accept that or would you agree with that? So of course businesses have to make plans if they're going to be successful and we want to support farmers to be doing that and in particular we envisage that the whole farm plan should give farmers base lining tools. Do we think that there will be a cost incurred in that? Yes, any activity that you undertake as a business is going to incur your cost, at least opportunity cost of your time. So yes, we recognise that there will be costs associated with that but there will be more than we hope and envisage by the support that's available for doing that and we'll be saying more about that when we bring forward the whole farm plan proposals, as we hope to do very soon actually. Okay, thanks Gavira. Thank you, Michelle, to be followed by Liz. Thank you convener and good morning panel. Perhaps going back to a comment alluded to by the convener earlier, our specific challenge in this committee is to take a view on the financial memorandum as presented and clearly the questioning thus far has brought out a significant amount of areas where there's uncertainty and I think we've covered a lot of them in terms of costs. We know that standing orders basically set some kind of rules around production of FMs and basically the best estimates and costs and savings and so on and also an indication of the margins of uncertainty and a range if you like of course sort of surprised when I looked at the FM that they all appear to be fixed costs with all the things that have been brought out thus far not considering future inflation and you know missing certain areas. So what was the rationale for not including ranges which give an indication of certainty or otherwise? So I think that the principal area of uncertainty is the budget that will be available to us post the election that's the UKG election and that the risk associated with that is really large compared with the other risks. So the degree to which you then try and ascribe uncertainty to the other factors pales into perhaps maybe not insignificance but it would detract the value of giving an uncertainty range in terms of the other elements and so we adopted an approach where we would give the best estimate and then make clear the caveats that are around that in terms of on-going engagement with the sector about how best to do it and that may result in vain delivery costs for example as we've already discussed. So there's quite a lot of uncertainty about that but quantifying that uncertainty is really quite difficult and it would be, we felt that it would be unwise to provide spurious accuracy around that when actually there's quite a lot of unknown but what we are committing to is delivering the current quantum of the budget that's all we can predict and maintaining our delivery costs close to the current level and the transition costs we've sought to provide an early estimate of and we're working to make that more accurate as we work through the business case process for change. I mean so you've highlighted it's actually uncertainty cubed because of the the points you've made. What consideration did you give to other mechanisms because in a sense that you're kind of going through the process, the process says that you must present an FM in terms of standing orders of the Parliament in the face of considerable uncertainty. Did you consider other approaches which was now fully accepting the significant challenges around the cliff edge of UK Government funding but did you consider further going further in this process before coming back with an FM because you'll appreciate that I think you know as a committee we can't you know have a great deal of confidence in it as presented for the reasons you've set out so did you consider other approaches perhaps more co-design to get more firmness around the figures. So we've been working hard with the sector since well since the last election it's the last Scottish election in terms of working through the vision towards what a framework might look like and then we're now working through how that might be implemented and we've been so it's fair to recognise that there's been criticism about the time that that has taken and I recognise that I think we all recognise that but I think it's also important that we have taken the right amount of time to to get that process right and to bring the industry with us whilst continuing to support our farmers and food producers across Scotland which we are doing and continually improving that process in itself so we are currently at the position where we have to present these documents to you as part of the Standing Lords as you say so if we had taken longer to do it would it be better yes but then you wouldn't have it today to scrutinise in advance of the bill process so we're trying to do those two things in parallel because that's the right thing to do rather than to rush through it and present something which is perhaps less accurate might look better so I think we're we're being honest about where we've got to and it's that it's as good as we can make it at this stage but I think do you understand the point I'm making though about you know us in our role that how confident can we be in the numbers as presented for the the reasons that you set out you know I've asked this question before actually witnesses you know if I said to you on a scale of zero to 10 where zero is no confidence and 10 is absolute confidence what number would you give me specifically on the FM as presented today so I'm very confident that what we've done presents an accurate picture up to the point that we're at notwithstanding that the 11% should be 8% I think so that's as good as we can make it we know that it will improve as we go through the business case in terms of how much the transition is likely to cost us and we know that the cost to businesses with compliance and the new framework will improve and we will tackle that during the impact assessments for the subsequent legislation and that is as good as we can make it given that we're trying to do this in an incremental way with the sector and I suppose that goes to an earlier point again that the convener alluded to in terms of these framework bills if you're saying it's as good as it can be at this point in time and clarity for the clarity will emerge over numbers that will be beyond the point where the finance committee has oversight and thereby necessarily leading to considerably less financial scrutiny from a parliamentary point of view therefore logically a higher probability of increased costs because we've not got our kind of fingers all over it from a purely financial perspective. Do you recognise that that might be a concern for us in terms of because we consistently are noting that we've got incredibly constrained public finances but we're building into processes less scrutiny in the face of that you know the constraint. Yes so I recognise that that you would feel that way about it I think the important thing is that the bill provides us with the powers to continue to support farmers in rural Scotland and in bringing forward the bill we've set out the purposes for which we intend to do that and we intend to use as much of the available budget as we can get from the UK Treasury settlement with Scotland and other administrations so those things are very confident are right. The specific budget that we get is unknown and it would be unknowable within the lifetime of this Parliament in fact and we were duty bound to take the powers to continue to support farmers in this Parliament otherwise the sunset across the 2020. You can't introduce yet another cliff edge on top of the UK government. So that's where we are and I think ministers and the finance memorandum have set out in good faith where we wish to be but the powers in the bill we believe are the right ones to take and the implementation measures will be scrutinised in due course when the secondary legislation comes in and throughout the rest of the progress of the bill itself as more of the details emerges albeit that that will principally be led by another committee. But the other key element is that the budget setting in this area is scrutinised by the Parliament in the budget process in any case and that would be with or without the bill so it's in terms of the amount of support available to the farmers and under administration costs those are already scrutinised by the Parliament in the bill in the budget bill process in any case. So I think from that's the more important element of the scrutiny of the finances that are around agriculture rather than the bill the bill financial memorandum. Thank you. Can I just associate myself with the remarks that Michelle Thomson has indeed with Mr Greer, Mr Halco Johnson and Mr Mason's comments because they have all in their different ways exposed a lot of the uncertainty which you yourself, Mr Kerr, have admitted exists. This is an important bill especially to support rural Scotland which has been at the difficult end of a lot of considerations in recent times. If you were in our shoes as members of this committee would you be accepting this financial memorandum? Definitely. Could you just explain why you think it is acceptable to accept it on the basis that there are so many uncertainties within it which you have admitted to? So the uncertainties are largely being driven by external factors and our desire to work with the sector to bring forward the best policy implementation we can for the vision for agriculture. I think that those two things are demonstrable by our actions in terms of updating our route map of when we intend to bring forward the different pieces of support and in terms of the overall budget settlement with the UKG. We've been pressing that continually since the last Scottish election and previously with Mr Ewing as well. That's an issue that Scottish ministers and the Scottish Government in general have been completely consistent with. All of our actions have demonstrated our good faith in this area and we've set out with us as much accuracy as we can the position and we're committed to working with the sector and with the Parliament as we take each step. We've published when we're going to take those steps so that's why I think we're on your shoes. I would accept it. Mr Kerr, when Mr Greer was questioning, he quoted the section in the financial memorandum that said that it's unclear what the precise split of funding across the tiers is yet to be determined. It goes on to say that that is a key component of the co-design work currently underway. Can you tell us about the co-design work that is on-going? In terms of the mechanics of that, we are in routine dialogue with the agricultural reform implementation oversight board, RAOB, which is a group from across the different land-based sectors, including some of the NGOs that Mr Greer talked about. We're bringing forward the vision, then we're saying that in order to achieve that vision, for example, in the beef calf scheme, we think that we need to introduce certain conditions and then we are working with the sector about whether those conditions will work, the extent to which they will deliver the outcomes that we're looking for, so in that case produced emissions, and then we're looking at how we implement that and the delivery costs associated with that, and then presenting options to ministers for a decision in that. So that is how the mechanism of the co-design work is happening? So that is not determined by external factors so much as what is going on in terms of Scottish Government policy, is that correct? So it's driven by stakeholder engagement with our vision and our intended outcomes, so in that sense we're working through it with the external parties, but it's largely controlled by us, yes, if that's your point. Yes, it is. My point is that if that is controlled largely here in Scotland with that on-going co-design, which is an issue that we've had in some other bills, how are we able to interpret what the on-going costs of that on-going co-design are going to be if we're not sure what the co-design is going to result in? I'm not quite sure. If there's on-going decisions to be made through co-design, as the financial memorandum says, how are we able to scrutinise what the costs are associated with that on-going co-design if it hasn't happened? Yes, we're not in a position to know the costs yet of individual options because we haven't reached the point of final advice to ministers on that yet. I was going to come in on some of the comments that John Mason had, but I just want to go back. I did ask you about why this process didn't start earlier. Why didn't it start earlier? We're five years potentially behind other parts of the United Kingdom on this. I'm not sure I would agree, but with the premise of the question in terms of being behind, I attended the NFUS conference in October and NFUS President, Minette Batters, talked about where she felt NFU England Wales talked about where she thought other parts of the UK were at and was very envious about where we are in Scotland. Are we further behind? That depends on what your objective is to be. We could be more advanced. The process could have co-designed framework, etc. It could have started earlier. It could have done, but we undertook to provide a period of stability and certainty to the sector during and immediately after Brexit, which we did. Farmers and crofters in Scotland have a great deal of certainty about their current payments and their payments in the next year or so. We have also set out clearly what we will deliver to them in future years in terms of our route map. I think that we are taking our reforms forward at a different pace from other parts of the UK. That's true, but are we behind? That depends on what you are seeking to achieve. I think that we have been really clear, for example, in the climate change plan process, that that is an important focus for us in Scotland. We have gone through a process of having climate change example farms and the monitor farm process has been focused on those things. Our policy journey, in support of those outcomes, has been steady and clear for some time, and we are at the natural next step. The timing is in the Scottish Minister's hands, but judging it by another territory's approach is not necessarily a good yard stick. As I said, I just wanted to really get some clarity. John Mason was talking about the IT support. On table 5 of the memorandum, that's at 60 million. We've talked about that earlier. Can I just get clarity? Is that for streamlining or improving the current system, or is that for delivering a new system? It's not possible to completely separate those things, because we need to do technical evaluation of what needs to be kept within the current system, what might be new. We are still working through that, and what the structure of it, what capabilities—for example, we are looking at capabilities first. What do we need the system to do? How much does current systems do that? What might we do in the future? This is very much a best guess number. In March 2003, an informed system was given a £24 million contract for a new IT system. Is that for an IT system, or is that part of this 60 million reviewing what's there? I think that it's part of that. I'm not certain. I think that we've undertaken to work with a range of external help, in order to maintain our current systems, look at what new systems we might have, and to evolve some of our systems to do the new things. There's a range of those things, and we from time to time engage with external contractors to help us with that. We're not the best place to say which of those contracts is doing which of those things. I appreciate that, but we're looking at the finances on it. That isn't necessary to provide a new system, but if a new system were as required, there would have to be additional costs on top. It's really hard to say because we're doing this assessment of what capabilities we're looking for. To what extent can current systems, is it desirable for current systems to do that? How much would the maintenance of a current system or improving it compare against buying something new? All of those things are things that we're looking at, so it's impossible to sort of separate out and say right now that there are off-the-shelf systems, for example, that you can buy. Does that represent better value for money than changing what we currently have? We haven't done those assessments of all those different options yet. The fear that I have is that you will be aware, I appreciate it, it's not your area, but in 2012 we had a new system brought in. It was meant to cost £102 million, it ended up costering £178 million, as John Mason. Huge potential cost overruns, massive disruption to the sector with costs on top of that. My fear is that we don't seem to have that clarity on the potential costs of a new system or what we're actually going to be looking to deliver here. I think that the committee took evidence about that at the time, or it was pre-decessorded, and we're keen to avoid the situation that we got into with IT futures. I was in the directorate, although not in this role at the time, and it was bruising for everyone concerned, including front-line staff who were facing farmers, so I totally recognise that. What we've set out here is the additional costs, which is not the current overhead cost of our current system. What we've set out here is the transition costs, and they're the best guess at the moment. One of the issues with the previous build was perhaps forecasting the cost too low at the start, so when we're rightly criticised for an overspend, we're keen to avoid that mistake as well. We've set out what we can here, and we're going to improve that, and we're working with assistance of experts in this area to put together a more accurate costing of what a future build might cost us. That's 60 million, if it did require a completely new system. The 60 million is what we are currently forecasting for digital infrastructure, but that might not be accurate, and we will come forward with a new figure in due course. At the moment, we're forecasting that that is what the new systems will cost, but, as you said, the last time around it eventually cost 178, or whatever it is, published in the PAC report at the time. That concludes questions from the committee. I've just got a couple of questions on myself to wind up. One, for example, is with regard to paragraph 68 of the financial memorandum, which says, in terms of subsidies, that those who deliver sustainable, regenerative farming will benefit the most. In future, support will be focused on food production, actions to support nature restoration and to reduce greenhouse gas emissions in a way that is economically and socially just by maintaining base payments with conditions. All farmers, crofters and landmanners should be able to meet if they choose. Those words, if they choose, almost means that everything that I've read out in that sentence is really, well, if they don't want to do it, they don't have to do it. What incentive is there going to be to ensure that farmers deliver on what the Scottish Government is seeking in terms of improved food production, better climate actions, et cetera? The reason that we wrote it in that way is because we anticipate that all farmers will continue to engage with tier 1, the base support, because it broadly has the current conditions associated with it, with some more that we're bringing in to improve base lining and one or two other things. We strongly envisage that that support will be taken up by those who are currently engaged in food production and will continue to do so. Where we are less certain that there will be engagement is in tier 2, which will have a significant amount of support associated with it for most businesses, but it will also require them to contribute more for that support in terms of environment and nature outcomes. However, we currently don't envisage making that tier compulsory, so if farmers choose not to engage in the measures that we bring forward, they would also not receive the payment associated with it. That doesn't really what it says there. It's basically talking as if they'll still get the payments whether they meet those conditions or not. That's how it reads. It's not intended to read that way. It's intended to mean that farmers will only receive support if they meet the requirements of each of the tiers. Finally, on an issue that no one has brought up before, which is the national test programme, national test programme will support and encourage farmers and crofters to learn how their work impacts on climate and nature, including offer and financial support, to carry out carbon audits, soil testing and nutrient management planning, establishing a clear baseline and options for action for all who participate. Here, I'm going to basically declare a constituency interest. 19 per cent of greenhouse gases from Scotland are agricultural. I'm just wondering whether or not the Scottish Government is looking in terms of its greenhouse gas reduction at introducing the food additive Bovar. It has been developed by DSM in my constituency in Dorae. It was opened by the previous First Minister, St Andrew's Day 2022. 100 million pound private investment and 12 million pound from the Scottish Government. That additive will reduce methane outputs from sheep and cattle by 20 to 30 per cent. I see nothing in terms of farmers being incentivised to use such an additive, which has already been used in many areas. The Dorae factory will provide this product worldwide. It's a huge success. DSM chose to derive over 35 other locations worldwide for its production, so I'm delighted that it's in my constituency. However, I don't see anything if we're going to be targeting methane reduction, how a product like that will be about less than 3 per cent, just over 2 per cent of the agricultural bill, but deliver phenomenally in terms of greenhouse gas reductions through agriculture, if there's going to be encouragement to use that and financial support for farmers to use it. At the time of writing the financial memorandum, I don't think that we have been approved for use it now has. As it happens, I was at the opening as well and saw the great work that they're doing there in terms of the local employment. However, in terms of the use of bovair as part of delivering emissions reduction, we absolutely recognise that and that's built into some of our thinking in the climate change plan in terms of the measures that can be used. We do have to work through how it is reported in the national emissions inventory, so that's an issue that we need to work through at a UK level, not just in Scotland, and then the monitoring and verification of its use on farms. We have to use it properly in order to get the 20 to 30 per cent emissions reduction that you rightly talk about. We do want to work through those issues with the sector, so yes, it's very much on our radar and the livestock production team in my area are currently working on that, among other things. Of course, there are other ways to reduce emissions from cattle and breeding is also important, so it's not the only mechanism there. Currently, the approval doesn't extend to all remnants, so there's a larger issue, but certainly there is a place for it in the dairy sector, and that's part of our planning. Thank you very much for that, and thank you for your evidence and your team, Mr Kerl. It's been very helpful. We will consider the evidence received and any next steps that we must take in relation to scrutiny of a financial memorandum in private. That concludes the public part of today's meeting, the next item on our agenda, which will be discussing private as consideration of a work programme. We will now move into a private session at 11.30.