Farm debt levels prompt Scottish government 'loan scheme'

The levels of bank debt are the highest recorded since records began in 1972
The levels of bank debt are the highest recorded since records began in 1972

Details of a nationally-funded loan scheme for CAP Basic Payment 2016 to provide cash flow and stimulus into the rural economy have been unveiled.

The announcement comes as debt levels for farmers in Scotland increased by more than £150 million when officials failed to deliver crucial CAP payments.

The levels of bank debt are the highest recorded since records began in 1972.

Debt levels, when adjusted for inflation, are up eight per cent on the prior year.

At the end of May 2016 a total of £2.2 billion was owed to banks - a rise of £177 million on the previous year, and the seventh year in a row that debt levels have increased.

The Scottish government said the new loan scheme will provide
The Scottish government said the new loan scheme will provide 'certainty' for farmers and crofters over winter 2016

Opposition parties are now warning that hard-pressed farmers have "no confidence" in Scottish ministers that the problems will be addressed for next year.

The Scottish government said the data 'reflected the overall UK picture', citing figures from the Bank of England which show debt levels across the UK 'agricultural, hunting and forestry' sector has risen by 51 per cent since 2010 to £17.7 billion as of May 2016.

The Scottish government said the new loan scheme will provide 'certainty' for farmers and crofters over winter 2016 and seek inject up to £300 million into the rural economy.

"Farmers and crofters will be able to apply for a loan of 80% of their CAP Basic Payment and Greening 2016 entitlement, up to a maximum of €150,000 and receive their loan payments in November," the government said.

Learning lessons from 2015

"I am confident that we are putting the 2016 payments on a better footing," said Cabinet Secretary for Rural Economy and Connectivity Fergus Ewing.

"I am also reassured that the arrangements we have put in place with our IT contractor mean that they should be able to deliver on the timescale they have committed to for payments.

"But those arrangements are not risk free and frankly, these are not risks I am prepared to take, particularly with families and communities’ livelihoods.

"Having learned lessons from the 2015 round of CAP payments, I am determined to provide as much certainty as we can, not just for farmers and crofters, but for the wider economy in our rural communities.

"I am therefore announcing today, that farmers will not have to wait until 2017 to receive payment of their CAP entitlement.

"Letters will be issued before the end of the month to farmers inviting them to apply.

"Every eligible applicant who applies by the deadline of 12 October will receive a loan of 80% of their entitlement in November.

"Our estimates suggest that over 17,000 businesses will be entitled to qualify for this loan initially, with work continuing to make offers and payment to the remaining eligible businesses by the end of the year.

"I would therefore encourage all of them to apply for this funding. It will give them the security and certainty they need to enable them to plan for the year ahead while driving forward the rural economy," Mr Ewing concluded.