S.I.F. Briefing: Scottish islands and the impact of Brexit

Scottish Islands and the impact of Brexit

A briefing paper by the Scottish Islands Federation

On 18 January 2017, Camille Dressler S.I.F. chair met with members of the Scotland’s Place in Europe team at Victoria Quay.  This is what she said: ‘The main concern for the Scottish Islands Federation is how the move away from CAP and the EU Cohesion Policy with its associated structural funds will be managed to safeguard the fragile economies of the islands and avoid real risks of depopulation.  ‘

Importance of the EU Cohesion Policy for the islands

1. The EU Cohesion Policy’s stated aim is to improve the economic well-being of regions in the EU and also to moderate regional disparities. The policy is geared towards making regions more competitive, fostering economic growth and creating new jobs. It also has a role to play addressing important wider challenges such as climate change, sustainable energy supply and globalisation.

2. More than one third of the EU budget is devoted to this policy, which aims to remove economic, social and territorial disparities across the EU. Crucially, through Article 174 of the Lisbon Treaty, the policy recognizes inherent geographical challenges faced by islands.

3. In the current 2014–2020 funding period, Cohesion Funds have been allocated between regions that are deemed to be a) “more developed” (with GDP per capita over 90% of the EU average), b) “transition” (between 75% and 90%), and c)”less developed” (less than 75%).

4. With a GDP of 75 to 90% of the EU average, the Highlands and Islands have ‘transitional region’ status. This has enabled the area to benefit from a whole suite of European funds targeted at social and community projects, infrastructure, businesses, partnerships and future proofing measures, including investment in renewable energy projects.

The European Structural Funds

5. Through European Structural Funds, the EU Cohesion policy has provided vital funding for Scottish island communities and our neighbouring regions.

6. In the programming period, 2007-13, Scotland received approximately £680m in Structural funds. About 800 national and local projects were supported. Major strategic projects funded include the Shetland Fibre optic broadband cable, the Lerwick District heating scheme, the Scalpay and Eriskay bridges, and the Loch Carnan wind farm in the Outer Hebrides, as well as harbours and other key infrastructure developments. In Highland, the piers and ferry for the Small Isles were built with the help of EU funds, whilst the electrification of Eigg would not have been possible without £764 000 of ERDF. Flagship cultural projects supported include the Mareel Cultural Centre in Lerwick, the Orkney Theatre, the Scapa Flow Trail, Scotland’s Islands Cultural Programme, Garrenin Museum and Village and improvements to the Callanish Visitor Centre. Structural funds supported training at Calanas Wool Mill in Uist, social enterprise and leadership training throughout the islands, and have delivered benefits for many islanders. Islands have benefited from strategic investment in the University of the Highlands and Islands and the Scottish Investment Bank Loan Fund has helped SMEs across the area.

7. For the 2014-2020 programming period, increased levels of investment were secured. The European Regional Development Fund (ERDF) and the European Social Fund (ESF) are investing €476m and €464m respectively, including support for a Low Carbon Infrastructure Transition Programme. Some community infrastructure projects on islands have already benefited, notably including Luing’s award-winning Atlantic Islands Centre.

8. European structural funds have had a positive and progressive impact on small businesses and local communities across Scotland, but can deliver special benefits to islands through their inclusiveness, helping to maintain and enhance the quality of island life.

The Scottish Rural Development Programme:

9. The Scottish Rural Development Programme (SRDP) channels millions of Euros into the rural economy to help create vibrant rural communities, protect and enhance the environment, encourage rural businesses and support the farming industry to grow and modernise.

10. Funding for a diverse range of projects may be accessed by individuals, businesses and groups, through grant schemes. A number of these are specifically directed at crofters and farmers, such as the Croft House Grant Scheme, the Crofting Agricultural Grant Scheme, the Small Farms Grant Scheme, the Less Favoured Area Support Scheme, The Scottish Suckler Beef Support Scheme, the Food Processing, Marketing and Co-operation Fund, Young Entrants Scheme and Young Farmers start up funds.

11. LEADER funding has also been invaluable for the islands, providing a ‘bottom up’ partnership-based approach to rural development.LEADER has supported multi-sectoral, community-based development and helped individuals, communities and businesses come together to design and implement Local Development Strategies. In doing so, LEADER has helped build social as well as economic capital on many Scottish islands.

12. From 2008, in Argyll and Bute alone, LEADER has funded over £6m to 200 projects, levering over £15m to the area in match funding, thus providing a substantial cash injection to communities in the region including the islands of Mull, Arran & Cumbrae.

13. There has been real uncertainty over the latest round of LEADER funding (2014-2020). The programme got off the ground very late and is now at risk of being devalued during Brexit negotiations.

Common Agriculture Policy

14. Support payments derived from the CAP are hugely significant to the viability of Scottish agriculture as the vast majority of farms and crofts remain highly dependent on ‘Pillar 1 direct support payments’. (63% of farmers’ income). Agri-developments are jointly funded by the EU and the Scottish Government under ‘Pillar 2’ schemes.

15. Maintaining communities through farming and crofting is more significant in Scotland than it is in other parts of the UK and especially so on most Scottish islands.
16. A small island farm on the Isle of Muck, with 630 ewes and 50 breeding cows on approximately 400 HA, faces challenges typical of other islands in terms of high costs of importing feed (£475 for a lorry’s ferry ticket) and an additional £600 payable for exporting a lorry load of livestock, compared to mainland farmers.

17. With only a limited number of large agricultural units in Scotland able to show a net profit without agricultural support mechanisms, the fear is that additional costs facing islands could be disastrous in their absence.

18. The EU’s convergence target of minimum payments of €196 per hectare by 2020 would need to be Scotland’s minimum allocation of direct support funding to deliver parity for equivalent enterprises on similar land types – and so establish a more even playing field, as stated by NFU Scotland. In the context of the UK government’s apparent lack of commitment to agriculture and food security, the fight to retain minimum payments is vital if agriculture in the islands is to remain viable.

19. Most agricultural activity in the West Highland and Islands centres around production of sheep and cattle. The UK sheep industry is substantially dependent on exports, with something like 60% of UK lamb consumed in mainland Europe.
20. The nightmare scenario for Scottish beef and lamb producers is that they may have to compete with subsidised European producers, with diminished access to markets and less support. (possible imposed tariff of 20% depending on options). Brexit could potentially decimate Scottish agriculture, and especially island producers, in the absence of other means of financial support coming on stream.
    

    Local Authorities serving the islands
    

21. In spite of budgetary and policy restrictions imposed by central government, some local authorities have managed to pursue economic development strategies using European structural funds. It is difficult to see how they can continue managing economic expansion without access to such fundMuch legislation affecting local government and requiring local government implementation originates in Brussels. Social and environmental protection, health and consumer protection, working time directives, the transfer of undertakings, procurement and state aid, transport policies, and rural and maritime policies are among the many areas affected by the EU.

 

23. The high quality of the natural environment is of particular importance to islands, in terms of food production, tourism and the local quality of life. Scottish and European sustainability agendas generally accord well with island interests whereas the UK government’s approach to environmental priorities can tend to be at odds with insular perspectives.

24. Many islanders fear that Brexit will reduce investment of resources in environmental concerns and bring adverse consequences for Scotland’s islands, especially with diminishing resources available to local authorities. Because of their fragile natural and social environment, the islands will be more vulnerable to a potential hollowing out of environmental and social protection.

EU wide collaboration

25. The Scottish Islands collaborate with their European counterparts in policy development at various levels. The larger islands are involved in the Island Commission through the Committee for Peripheral and Maritime Regions with local authorities also benefiting from INTERREG cooperation and other opportunities to exchange knowledge and cross-fertilize ideas and actions. Smaller islands are involved too, through existing networks such as the European Small Islands Federation (ESIN). Together they have succeeded in pushing for better recognition of the island situation at European level, culminating in the Island Declaration of February 2016. Years of collaboration between European islands through Islenet, IslePact, and more recently SMILEGOV (Smart Island Governance) have demonstrated that islands can usefully host projects and share valuable transferable knowledge on smart and efficient resource and infrastructure management. The Smart Islands Declaration, scheduled to be launched in spring 2017, is asking for the evident potential of islands as leaders in innovation and renewable energy production to be recognized and resourced by the EU.

26. There is a real concern about loss of knowledge exchange and collaboration opportunities for islands across Europe on issues of common concern, notably including better management of energy and resources. Scotland’s own Zero Waste island flagship project on Bute would not have been possible without European support and inspiration. Over many years Bute has addressed key themes of waste management and recycling, composting and local food production, community energy, low carbon transport and more. Much of this work has been supported by European funding and in turn, inspired other European islands, creating employment and learning opportunities in the process.

What will happen to the islands post-Brexit?

27. Leaving the EU means that Scotland’s islands will no longer benefit from established funding avenues and exciting collaboration opportunities. European money has supported rural development on Scottish Islands to a far greater extent than UK government in recent years. Risks to islands’ agriculture and other key sectors are of real concern, with fears urban priorities may now overshadow the needs of Scotland’s more pristine periphery.

28. Our island economies will need continuing support if our primary industries are to fulfill their potential in the global market place for high quality, value added food & drink. Crucially, Social Enterprise will also require support to plug gaps left in island services by dispassionate market forces.

29. The overarching danger is that de-population will resume or worsen, leaving populations on islands less able to sustain viable livelihoods.

30. Some EU funds – such as Horizon 2020 – may be available through partnership and ‘buying in’ either as the UK or Scotland. However, there are no guarantees that islanders will continue to benefit from Europe in the ways we have in recent decades.

31.The proposal published by the Scottish Government in “Scotland’s place in Europe” presents options which are solutions to many issues – in terms of trade, freedom of movement, protections for workers, and environmental standards. It makes an eloquent case for Scotland’s continuing access to the Single Market. However it does not address in full the replacement of those EU funds, which have been so fundamental to sustaining so many of our island communities.

Some islanders’ comments

32.”Islanders are now fearful of their prospects if access to EU structural funds is removed.” Harris

“We would like to ask if there is anything to replace LEADER funding in the future.” Unst

“My job as island development officer is part funded by the EU, how will this continue?” Rum

“The depopulation that’s happened out in these islands – and it’s happened worst in Harris than anywhere in the Outer Hebrides – will just continue to increase.” Harris

“What continued direct support for active farmers and crofters will there be, as this will remain vital to sustain communities?” Eigg

“How will we continue to work with our EU island colleagues on common themes and projects?”

“We will lose out and be left behind.” Tiree

“A substantial number of schemes would never have taken place without EU funding, especially the infrastructure projects which have been completed throughout the Western Isles over the past twenty years or more. Objective One and LEADER funding have financed a large variety of projects, including small renewable schemes.” Carloway, Lewis

“Mull is very dependent on the farming industry, what will happen now?” Mull

“What will happen to replace the current level of EU funding following Brexit? We have concerns about disparities between different regions following BrexitWhat will happen to farming subsidies, fishing quotas, transport/boat service?” Orkney

“The age and condition of the boats (Orkney Ferries) is a source of great concern. The cost of taking a vehicle on the ferry is prohibitive for many. Without EU funding to support improvements, what will happen? Without pressure and funding from the EU, the outer isles of Orkney and elsewhere in Scotland will be left to decline, with the rate of depopulation increasing on all but the largest isles.” Sanday, Orkney.

Our questions to the Scottish Government

33. “EU funding has got to be replaced to look after these peripheral areas by either the Scottish Government or Westminster”, says Angus Campbell, Leader of Comhairle nan Eileanan Siar. Our questions for the Scottish Government in their current negotiations echo the sentiments of this statement.

• Policies

34.What policies if any will be put in place at UK and Scottish level to replace the Cohesion Policy framework?

35. If such policies are to be established, how would the necessary Structural Funds be established and at what level would they be administered?

36. How would Scotland feed into that process? How would the communities most affected be engaged to support development of policies behind the funds?

37. We are not convinced the UK government has an interest in developing a cohesion policy that will be comprehensive enough to take into account Scottish islands’ needs or issues facing any peripheral area in Scotland. Is there appetite within the Scottish Government to challenge the UK Government on the crucial issue of Cohesion Policy replacement?

• Structural funds

38. How can existing levels of funding be protected?

39. What will be asked of the UK Government in this respect?

40. What funding guarantees can the Scottish government ask or provide?

• EU Cooperation

41. What measures are the Scottish Government prepared to take to ensure that cooperation with other EU island regions can continue?

• Island Farming and crofting

42. How can the Scottish government protect unique geographical origins and protected names, such as Scotch Beef and Scotch Lamb? What about Protected Designation of Origin (PDO) and Protected Geographical Indication (PGI), which are of such importance for the islands?

43. How can free access to the European Single Market as proposed in “Scotland’s place in Europe” ensure agricultural goods and products are included?
44. What assurance can the Scottish Government give that any new policy framework for Scottish farmers and crofters (direct payments and rural development measures) will be adequately funded and will take into consideration the special situation of island agriculture?

• Environment

45. How is the Scottish Government planning to ensure that environmental protection which is crucial to the sensitive and fragile environment of Scotland’s islands will be continued?

46. What about the 2020 goals and commitments to lowering carbon consumption, notably through production of renewable energy? Scotland has already exceeded its targets and has positioned it self as a model of innovative technology in Europe. But we are concerned that the Scottish islands lead in renewable energy production may be further eroded and hampered as shown already by the lack of support for the shovel ready projects of Remote Island Wind in the Northern and Western Isles. It is difficult to see how island communities will be able to maintain our lead in innovation and carbon reduction and invest in further renewable energy schemes in the future, if access to EU funds is blocked and the UK government continues to take retrograde steps on renewables.

• Local authorities

47. EU laws and regulations impact on many Council services, such as waste, employment, health and safety, consumer protection and trading and environmental standards, all of which affect the islands.

48. How will the Scottish government ensure that regulatory power over such services will not be simply transferred from Brussels to an indifferent Westminster regime?

• Conclusion

49. The prospect of Scotland being forced to leave the EU against its will is one which will starve the islands of a crucial economic and social support and potentially jeopardize our fragile and precious environments. This has the potential to hamper the islands’ development and aspirations for decades to come.

50. On behalf of island communities, the Scottish Islands Federation urges the Scottish Government to consider the particularly serious risks to the economies of islands and our future development prospects posed by this perilous situation. We exhort the Scottish Government to explore all possible avenues, including access to the Single Market, to ensure that these risks are minimized.

51. In particular, we would like to ask the Scottish Government to consider initiating negotiations on the possibility of setting an Island Convention on the model of the Alpine Convention. Should such a cooperation mechanism be set up before Article 50 negotiations are concluded, this might make it easier for the Scottish Islands to continue their involvement in the move to reduce island carbon emissions and also to benefit from any EU funding streams dedicated to such a programme across all EU island regions. This possibility was strongly suggested by DG Energy at the COP22 in Marrakech in November 2016 and is tabled to be discussed in the spring of 2017 during the Malta presidency of the EU.

Scottish Islands are famously blessed with relatively easy access to a high proportion of Europe’s natural energy resource potential, in trms of summer sunshine hours, winter wind and waves, and year round tides and currents. It is well recognised also that islands may serve as valuable proving grounds and test beds for emergent energy technologies, and also, modes of governance, with our vibrant, visionary and resilient island communities. In this light, S.I.F. remains hopeful that appropriately targeted investment in renewable energy and research and development will yet enable Scottish Islands to prosper as real assets to the Scottish nation, and we like to think, to Europe. Meanwhile, many islanders seriously fear that the UK government may recognise us only as peripheral liabilities post Brexit. We trust the Scottish Government will not let this happen.