Scottish farmers face losing hundreds of millions of pounds in subsidy after Brexit unless the UK government increases funding for Holyrood, a Scottish parliament committee has been told.

A senior economist and the National Farmers Union Scotland (NFUS) said the EU referendum vote raised significant doubts over the future of £452m in common agriculture programme spending in Scotland, because of the current Treasury deal to fund Holyrood.

Pro-Brexit campaigners insisted during the referendum campaign that all agricultural funding would be protected, as Westminster would equally redistribute the £350m a week it would allegedly save from no longer funding the EU.

Prof Graeme Roy, director of the Fraser of Allander Institute, an economics thinktank at Strathclyde University, told Holyrood’s European and external relations committee, which was recalled from summer recess to investigate the ramifications of the Brexit vote, that this was not currently possible.



Under the latest fiscal framework deal for financing Scottish spending, signed off by the then chancellor George Osborne in February, Holyrood would continue to be funded largely by the UK Treasury on a rough per capita basis, through the so-called Barnett formula, and by Scottish taxation.

Scotland’s population is about 8% of the UK total, but Scottish farmers receive 18% of the UK’s overall common agricultural policy (CAP) funding under the EU system, including 85% of less-favoured area payments. The industry has slumped in the last few years due to falling prices, increasing its heavy reliance on subsidies.

UK ministers, Roy said, would have to find a way of changing the current fiscal support system or protecting Scottish agriculture funding through another route. “I think that’s quite a significant thing which needs to be resolved relatively quickly,” he told MSPs.

The NFUS said it is pressing the UK government to guarantee funding at the same levels set out by the CAP for the next four years. But Clare Slipper, the union’s Scottish parliamentary officer, said UK ministers had yet to make any concrete commitments.

Slipper added that there was also a “massive question mark” over what the Scottish government was planning to do on farm funding post-Brexit. Leaving the EU meant ministers in Edinburgh would need to introduce their own agricultural policies, which could be far more beneficial to farmers than the CAP.

Slipper said: “Our concern is we don’t know whether there will be agricultural funding through the block grant or whether it will be ringfenced or topped up by the Scottish government.”

James Withers, of Scotland Food and Drink, said protecting agricultural funding was crucial to the success of many industries that relied on farm produce. His group’s members converted £3bn in agricultural raw materials into products worth £11bn to the Scottish economy.

Shortly before the evidence session began, the Fraser of Allander Institute warned that Scotland’s already struggling economy was likely to be hit by a further slowing in the next two years as a direct result of Brexit, potentially going into a technical recession.

MSPs were told, however, that the UK’s decision to leave the EU could be very rewarding for Scotland, allowing its major industries such as financial services and fisheries to grow but in different ways.

Hugh Chater, director of banking for Virgin Money, which has a large base in Edinburgh, said the city could see a boom in financial services if Scotland won special concessions giving it much better access to the single market than the rest of the UK.

He said Scotland could offer “safe harbour” for some other UK banks or financial services firms which were worried about losing their so-called passporting rights to operate in the single market. “I think that’s a very credible view,” he said.

The loudest welcome for the UK leaving the EU came from Bertie Armstrong, chief executive of the Scottish Fisherman’s Federation. He said leaving the common fisheries policy (CFP) was an extraordinary chance for Scotland to control fishing in a huge area of the continental shelf.

The UK’s exclusive economic zone in the North Sea and Atlantic “was a really, really big patch of prime maritime real estate,” he said. Control over that area had to be defended by UK and Scottish ministers during the Brexit negotiations; it would allow Scotland to overtake Norway and Iceland as major global fish producers.

“We have the opportunity, if there’s the political backbone not to trade it away again, to become managing partner in the best piece of the north-east Atlantic for harvesting seafood,” he said.

• This article was amended on 29 July 2016. An earlier version said incorrectly that James Withers was from the Scottish Food and Drink Federation.