RURAL ECONOMY AND CONNECTIVITY COMMITTEE AGENDA. 2nd Meeting, 2019 (Session 5) Wednesday 16 January 2019

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1 REC/S5/19/2/A RURAL ECONOMY AND CONNECTIVITY COMMITTEE AGENDA 2nd Meeting, 2019 (Session 5) Wednesday 16 January 2019 The Committee will meet at 9.00 am in the Mary Fairfax Somerville Room (CR2). 1. Transport (Scotland) Bill (in private): The Committee will consider a draft Stage 1 report. 2. Budget Scrutiny : The Committee will take evidence on the Scottish Government's Budget from Fergus Ewing, Cabinet Secretary for the Rural Economy, Andrew Watson, Deputy Director for Agricultural Policy Implementation, David Blair, Head of Budget Challenge, Graeme Hutton, Head of ARE Finance, Kirsten Beddows, Branch Head, CAP, GM Policy and Agriculture Climate Change, and Jo O Hara, Head of Forestry Commission Scotland, Scottish Government; and then from Michael Matheson, Cabinet Secretary for Transport, Infrastructure and Connectivity, Mike Baxter, Director for Finance and Corporate Services, and Robbie McGhee, Head of Digital Connectivity Policy, Scottish Government. 3. European Union (Withdrawal) Act 2018: The Committee will consider proposals by the Scottish Government to consent to the UK Government legislating using the powers under the Act in relation to the following UK statutory instrument proposals The Agriculture (Transfer of Functions) (EU Exit) Regulations 2019; and The Food and Drink, Veterinary Medicines and Residues (Amendment etc.) (EU Exit) Regulations 2019.

2 REC/S5/19/2/A 4. South of Scotland Enterprise Bill (in private): The Committee will review the evidence it heard on the South of Scotland Enterprise Bill at the meeting on Monday 14 January. Steve Farrell Clerk to the Rural Economy and Connectivity Committee Room T3.40 The Scottish Parliament Edinburgh Tel:

3 REC/S5/19/2/A The papers for this meeting are as follows Agenda Item 1 PRIVATE PAPER REC/S5/19/2/1 (P) Agenda Item 2 Cover note PRIVATE PAPER REC/S5/19/2/2 REC/S5/19/2/3 (P) Agenda Item 3 Paper by the clerk REC/S5/19/2/4

4 REC/S5/19/2/2 Rural Economy and Connectivity Committee 2nd Meeting, 2019 (Session 5), Wednesday, 16 January 2019 Budget Scrutiny Purpose of the session 1. In October the Committee sent a letter to the Scottish Government outlining the findings of its pre-budget scrutiny which focused on investment to support Clyde and Hebrides ferry services. The aim was to inform and potentially influence this year s budget which was published on 12 December The Scottish Government sent a letter on 20 December (Annex A) outlining its response to the Committee s pre-budget scrutiny. In addition to this work the Committee has also reviewed the budget in relation to the wider policy areas which come within its remit. 3. In the session the Committee will hear from both the Cabinet Secretary for Transport and Infrastructure as well as the Cabinet Secretary for the Rural Economy to address both the issue of ferries as well as questions relating to the Committee s wider portfolio. REC Committee Clerking Team January

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18 REC/S5/19/2/4 Introduction Rural Economy and Connectivity Committee 2 nd Meeting, 2019 (Session 5), Wednesday, 16 January 2019 European Union (Withdrawal) Act This paper supports the Committee s consideration of consent notifications sent by the Scottish Government relating to the following UK statutory instruments (SIs) The Agriculture (Transfer of Functions) (EU Exit) Regulations 2019; and The Food and Drink, Veterinary Medicines and Residues (Amendment etc.) (EU Exit) Regulations These regulations are being laid in relation to the European Union (Withdrawal) Act To assist the consideration of such instruments, a new protocol has been put in place between the Scottish Government and Scottish Parliament. Further detail on this protocol is available in a letter from the Cabinet Secretary for Government Business and Constitutional Relations. Reporting 3. Under the protocol referred to above, the Committee has the following two options following its consideration of the UK SIs a. Write to the Scottish Government to confirm it is content for consent for a UK SI to be given; or b. Consider the matter further, take evidence if appropriate and make a report to parliament. 4. If it chooses make to report, it may make one of the following three recommendations a. it is content for consent to be given for a UK SI to be made in the UK Parliament only. b. it is not content with the Scottish Government granting its consent and that the proposals should be made by an SSI; or c. it is not content with the Scottish Government granting its consent and that the proposals should be included as a UK SI in both parliaments made under the joint procedure. 5. The Committee s role in the protocol is to decide whether it agrees to the Scottish Government offering its consent to the UK Government to make regulations on its behalf. However, there are broader policy issues which may arise in future, not as a direct consequence of the notification, but due to Brexit itself. The Committee may wish to note these issues in its response to the Scottish Government and request that it be kept up to date on any 1

19 REC/S5/19/2/4 developments on these matters. These broader policy issues have been identified in relation to each instrument where appropriate. INSTRUMENTS 6. This table is intended to give a brief overview only. The notification letters and documentation for the instruments are included in annexes to this paper. Instrument Category Issues to note The Agriculture (Transfer of Functions) (EU Exit) Regulations 2019 B The Committee may wish to be kept updated by the Scottish Government in relation to the regulatory powers transferred by the SI and legislative scrutiny by the Scottish Parliament. The Food and Drink, Veterinary Medicines and Residues (Amendment etc.) (EU Exit) Regulations 2019 B None The Agriculture (Transfer of Functions) (EU Exit) Regulations 2019 Date notification received: 5 December 2018 Deadline for consideration: 18 January 2019 Categorisation: B (transfer functions) Notification: set out in Annexe A. 7. The instrument would transfer a number of legislative functions relating to the EU Common Agricultural Policy (CAP) that are currently conferred by EU legislation on the European Commission. 8. The instrument amends four EU Regulations of the European Parliament and the Council and two Commission Delegated Regulations. The functions being transferred relate to The CAP Direct Payments framework (Regulation (EU) 1307/2013) 9. Examples of functions that would be transferred include the Commission s power to amend rules on the basic payment scheme and a range of voluntary schemes, including payments to farmers for observing agricultural practices beneficial to the environment, young farmers and voluntary coupled support; 10. Functions will be transferred to each of the UK administrations to exercise in their respective areas. The Secretary of State may also exercise relevant functions on behalf of a devolved administration, but only with the latter s consent. 2

20 REC/S5/19/2/4 The CAP Rural Development schemes framework (Regulation (EU) 1305/2013) 11. Examples of functions that would be transferred include the Commission s powers to set: the conditions under which a person may be considered to be a young farmer ; the duration and content of farm and forest exchange schemes and farm and forest visits; and minimum environmental requirements; 12. Functions will be transferred to each of the UK administrations to exercise in their respective areas. The Secretary of State may also exercise relevant functions on behalf of a devolved administration, but only with the latter s consent. Common provisions applicable to the European Agricultural Fund for Rural Development (EAFRD) and the European Maritime and Fisheries Fund (EMFF) (part of Regulation (EU) 1303/2013) 13. Examples of functions that would be transferred include the Commission s powers to set: the methodology for calculating the potential net revenue of an operation; minimum requirements to be included in public private partnership agreements; and standard terms and conditions with which financial instruments must comply. 14. In relation to EAFRD, functions will be transferred to each of the UK administrations to exercise in their respective areas. The Secretary of State may also exercise relevant functions on behalf of a devolved administration, but only with the latter s consent. 15. Notably, however, for EMFF, some of these legislative functions will be transferred to the Secretary of State as the current Managing Authority of the EMFF on a UK-wide basis. The notification indicates that this is to reflect the fact that the EMFF is a UK-wide fund with one central Managing Authority. Any changes as a result of using the powers would be subject to the consent of the devolved administrations. The horizontal (i.e. cross-cutting) financing, management and monitoring of the CAP (Regulation (EU) 1306/2013 and Commission Delegated Regulations (EU) 906 and 907 / 2014) 16. Examples of functions that would be transferred include the Commission s powers to set: the obligations of public bodies responsible for making payments under the CAP; rules on the implementation of the farm advisory system; and technical and procedural rules on the application and calculation of administrative penalties; 17. Functions will be transferred to each of the UK administrations to exercise in their respective areas subject to agreement of a framework for ensuring coordination between administrations where appropriate. 18. The instrument will allow the relevant authorities (the Scottish Ministers in Scotland) to continue to make payments under the frameworks and enforce the framework regulations in the event of a no-deal scenario. According to the notification, the instrument does not make changes to substantive policy content. It states that the instrument respects the devolution settlement by 3

21 REC/S5/19/2/4 ensuring that Scottish Ministers can exercise all applicable functions under the retained EU law as modified by the instrument as the relevant authority in relation to Scotland. 19. The Committee clerks wrote to seek further information in relation to the proposed SI and the Scottish Government s response is set out in Annexe B. Policy and legal issues 20. No immediate policy or legal issues have been identified. 21. The Committee may, however, when it writes to the Scottish Government to confirm its consent, ask to be kept updated on discussions between the UK Government and devolved administrations on what scrutiny procedures should apply to the exercise of powers conferred under the instrument on Scottish Ministers to make regulations; and regarding the process for scrutinising UK regulations made under provisions amended by EU exit SIs or SSIs. The Committee will note the statement in the Cabinet Secretary s response that necessary processes will be developed in consultation with the parliamentary authorities. The Food and Drink, Veterinary Medicines and Residues (Amendment etc.) (EU Exit) Regulations 2019 Date notification received: 11 December 2018 Deadline for consideration: 24 January 2019 Categorisation: B (transfer of legislative regulation-making powers) Notification: set out in Annexe C. 22. These Regulations will establish a UK Geographical Indication scheme which requires to be in place on Day 1 following the UK withdrawal from the European Union. The amendments relating to geographical indications, which form the bulk of the Regulations, fall within reserved policy areas. 23. The amendments relating to wine, aromatised wine and spirit drinks which are mainly devolved are minor and technical and are for the purposes of fixing deficiencies in the legislation as a result of withdrawal. The notification notes that Scotland has no commercial winery operations and does not produce aromatised wine. 24. There are various provisions which transfer non-legislative functions in devolved areas, some to the Secretary of State to be exercised only with the consent of the Scottish Ministers and some directly to Scottish Ministers or Food Standards Scotland. 25. The Committee clerks wrote to seek further information in relation to the proposed SI and the Scottish Government s response is set out in Annexe D. 4

22 REC/S5/19/2/4 26. The proposed SI has been redrafted since the notification was sent to the Committee. Further information relating to the changes made are included in Annexe D. Policy and legal issues 27. No immediate policy or legal issues have been identified. DECISION 28. The Committee is asked to consider the consent notifications referred to in this paper and determine whether to a. write to the Scottish Government to confirm it is content for consent for the UK SIs referred to in the notifications to be given; b. to note and request a response from the Scottish Government on the wider policy matters identified which may require to be addressed in future; or c. consider the matter further, take evidence if appropriate and make a report to parliament. Committee clerks January

23 6 REC/S5/19/2/4 Annexe A COMMON AGRICULTURAL POLICY COMMON FISHERIES POLICY - NOTIFICATION TO THE SCOTTISH PARLIAMENT The Agriculture (Transfer of Functions) (EU Exit) Regulations Name of the instrument and summary of proposal The Agriculture (Transfer of Functions) (EU Exit) Regulations 2019 transfers a series of legislative functions that are currently conferred by EU legislation upon the European Commission to various UK administrations. This will ensure those functions can continue to be exercised at the appropriate national level within the UK after the UK leaves the EU. This instrument brings together a number of provisions relating to various policy areas, which need to be considered under the affirmative procedure at Westminster. The proposals in this notification should be read alongside the notifications already sent to the Scottish Parliament on 14 and 21 November which relate to: The Common Agricultural Policy and Agriculture and Horticulture Development Board (Amendment etc.) (EU Exit) Regulations 2018 The Common Provisions (Implementing and Delegated Acts) (Amendment) (EU Exit) Regulations 2018 The Rural Development (EU Exit) (Amendment) Regulations 2018 The Rural Development (Implementing and Delegated Acts) (Amendment) (EU Exit) Regulations 2018 The Common Provisions (EU Exit) (Amendment) Regulations 2018 The Common Agricultural Policy (Direct Payments to Farmers) (Amendment) (EU Exit) Regulations 2018 The Common Agricultural Policy (Rules for Direct Payments) (Miscellaneous Amendments) (EU Exit) Regulations Territorial extent and explanation of law that the proposals amend and summary of proposals The proposed regulations are to apply to the UK. The proposed regulations deal with retained, directly applicable EU legislation relating to the EU Common Agricultural Policy ( CAP ) regulatory regime so that it can continue to operate effectively throughout the UK in the event of a no deal UK exit from the EU on 29 March The proposed regulations cover the following CAP-related areas: the Direct Payments framework, the Rural Development schemes framework and the Horizontal (cross-cutting) financing, management and monitoring of these frameworks. The proposed regulations transfer CAP functions for these areas previously vested in the EU Commission to the various UK administrations. The proposed regulations take account of the UK devolution settlements and will empower the relevant authorities (in relation to Scotland that will generally be the Scottish Ministers) to maintain, manage and apply the Direct Payments, Rural Development and Horizontal frameworks so as to enable the relevant authorities to

24 7 REC/S5/19/2/4 Annexe A continue to make payments and enforce the framework regulations in the event of a no deal UK exit from the EU on 29 March A summary of the relevant EU legislation and proposed amendments to it is provided below. a. Horizontal regulations for the financing management and monitoring of the CAP Regulation (EU) No 1306/2013 of the European Parliament and of the Council of 17 December 2013 provides for the financing, management and monitoring of CAP. This principal regulation is supplemented by Commission Delegated Regulations (EU) Nos 906/2014 and 907/2014. These regulations provide powers for the Commission to lay down rules on the financing, management, control and cross-compliance systems for the CAP. In particular, the legislative powers in Regulation (EU) No 1306/2013 ensure the CAP can continue to function effectively and provide the necessary flexibility to respond to scientific, economic, technological and climactic developments which could affect the functioning of the CAP. The powers in this Regulation have a broad scope and cover the financing and management of a number of key areas of the CAP, including: the Common Market Organisation ( CMO proposed amendments to this EU legislation are to be addressed in a separate instrument which will be the subject of a separate notification in early 2019), Rural Developments and Direct Payments. Within these areas the Commission has the power: to set out the obligations of public bodies responsible for making payments under the CAP, to lay down rules on the implementation of the farm advisory system (to cover for example standards for good agricultural and environmental condition of land and agricultural practices beneficial for the climate and environment), to amend rules on the checks to be carried out to ensure beneficiaries of support comply with eligibility criteria, lay down technical and procedural rules on the application and calculation of administrative penalties, and to lay down rules on the lodging and handling of securities. These functions will be transferred to the Secretary of State, the Scottish Ministers, the Welsh Ministers and the Department of Agriculture, Environment and Rural Affairs ( DAERA ), to exercise in their respective areas subject to agreement of a framework for ensuring co-ordination between administrations where that is considered appropriate. b. CAP Direct Payments Regulation (EU) No 1307/2013 of the European Parliament and of the Council of 17 December 2013 establishes rules for direct payments to farmers under support schemes within the framework of the CAP. This provides the Commission with powers to amend rules on the basic payment scheme and a range of voluntary schemes, including payments to farmers for observing agricultural practices beneficial to the environment ( greening ), young farmers and voluntary coupled support. In particular, this regulation confers powers on the Commission: to amend the list of support of Direct Payments schemes set out in Annex I; to adapt national ceilings to account for developments in the total maximum

25 8 REC/S5/19/2/4 Annexe A amounts of direct payments that may be granted; to lay down rules regarding specific situations to ensure proper management of payment entitlements and to preserve public health; to add equivalent greening practices to those listed in Annex IX; to lay down the framework for the designation of sensitive areas and permanent grassland, and to lay down rules on the maintenance of such areas. These powers allow for Direct Payments to be made to farmers in line with the correct functioning of the CAP and provide flexibility to allow for economic and technological developments to be taken into account. These functions are transferred to the Secretary of State, the Scottish Ministers, the Welsh Ministers and the Department of Agriculture, Environment and Rural Affairs to exercise in their respective areas. The Secretary of State may also exercise relevant functions on behalf of a Devolved Administration, but only with the latter s consent. c. CAP Rural Development Regulation (EU) No 1305/2013 of the European Parliament and of the Council of 17 December 2013 provides for support for rural development to allow programmes currently funded by the European Agricultural Fund for Rural Development (EAFRD) to continue to operate throughout the UK after EU exit, for the remainder of the programme. In relation to Scotland, this includes the Scottish Rural Development Programme (the SRDP). There are a number of Commission powers that are being transferred within this regulation, which include the power to: set the conditions under which a person may be considered to be a young farmer ; set the duration and content of farm and forest exchange schemes and farm and forest visits; set the minimum content of business plans and the criteria to be used for setting the thresholds; set minimum environmental requirements; set conditions applicable to livestock farming and to rear local breeds that are in danger of being lost to farming or preserving plant genetic resources that are under threat of genetic erosion; set the further specifications of the characteristics of pilot projects, clusters, networks, short supply chains and local markets that will be eligible for support; set the minimum and maximum duration of commercial loans of mutual funds, set conditions under which other costs connected with leasing contracts and second hand equipment may be considered to be eligible for expenditure and specifying the types of renewable energy infrastructure; approve rural development programmes and to make amendments to those programmes; use payment modalities for participants costs; assess the progress of the business plan, payment options as well as modalities for access to other measures for young farmers under the farm and business development measures. These functions are transferred to the Secretary of State, the Scottish Ministers, the Welsh Ministers and the Department of Agriculture, Environment and Rural Affairs, to be exercised in their respective areas. The Secretary of State may also exercise the functions on behalf of a Devolved Administration, but only with the latter s consent. d. Common provisions CAP Rural Development and (non-cap) Maritime and Fisheries Funding Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 lays down the common provisions applicable to the European Structural and Investment Funds and sets out the aims and requirements of the

26 9 REC/S5/19/2/4 Annexe A funding programmes. This instrument amends the provisions insofar as they extend to the European Agricultural Fund for Rural Development ( EAFRD ) and European Maritime and Fisheries Fund ( EMFF ). The European Social Fund and the European Regional Development Fund will be dealt with in a separate instrument and will be the subject of a separate notification. The Commission has the power to: set out the methodology for calculating the potential net revenue of an operation; lay down rules for replacing a beneficiary in a public private partnership agreement; set out the minimum requirements to be included in public private partnership agreements; supplement the provisions for calculating the flat rate of operations that give rise to indirect costs; set out the methodology for calculating a programme s contribution to climate change mitigation; lay down rules on combining technical support with financial instruments; set out the standard terms and conditions with which financial instruments must comply; set out rules on the role, liabilities and responsibilities of bodies implementing financial instruments and; lay down rules on the withdrawal of payments to financial instruments. In relation to rural development, these functions are transferred to the Secretary of State, the Scottish Ministers, the Welsh Ministers and the Department of Agriculture, Environment and Rural Affairs, to exercise in their respective areas. The Secretary of State may also exercise the functions on behalf of a Devolved Administration, but only with the latter s consent. For maritime and fisheries, some of these legislative functions will be transferred to the Managing Authority of the EMFF, which is a role currently held by the Secretary of State on a UK-wide basis. That reflects the fact that the maritime and fisheries fund has been established as a UK-wide fund, with one central Managing Authority, and it is important to retain cohesion in the fund after EU Exit so that any changes to the fund occur at a UK level. Any changes as a result of use of the powers would only be carried out with the consent of the Devolved Administrations. The powers being transferred from the Commission for maritime and fisheries functions are: setting out the methodology for calculating the potential net revenue of an operation; laying down rules for replacing a beneficiary in a public private partnership agreement; setting out the minimum requirements to be included in public private partnership agreements and; supplementing the provisions for calculating the flat rate of operations that give rise to indirect costs. 3. Why are these changes necessary? After EU Exit, without amendment, the legislative functions within the above retained EU legislation would contain inoperable provisions which would prevent administrations throughout the UK from being able to make any necessary changes to each policy regime. The instrument uses powers in the European Union (Withdrawal) Act 2018 to correct this deficiency to enable the legislative functions to continue to be exercised by all relevant UK public authorities. The amendments will ensure that the regimes outlined above will continue to function smoothly after EU Exit. The instrument does not make changes to substantive policy content. Along with the proposed UK instruments which were the subject of the notifications to the Scottish

27 REC/S5/19/2/4 Annexe A Parliament on 14 and 21 November, the proposed changes are considered to be necessary to ensure that legislation remains effective and ensures (a) an operable CAP regulatory regime after EU exit and (b) the programmes currently funded by the EAFRD and the EMFF remain operable post-exit and are able to continue making payments to beneficiaries. Failure to implement the proposed changes will likely result in inability of these regimes to operate. As noted in the Cabinet Secretary for the Rural Economy s letter to the Convenor of the Rural Economy and Connectivity Committee of 7 November 2018, this will provide a clear and robust continuing legal basis for payments and the application of current CAP scheme rules as retained EU law as from exit day by maintaining the current UK-wide coherent legal framework. As part of the EU-Exit process planning for the possibility of a no deal scenario, the Scottish Government plans to make in early 2019 a Scottish Statutory instrument to amend relevant SSIs which implement specific aspects of the relevant EU CAP Regulations (as those will be modified by virtue of the proposed instruments) and provide for their enforcement in relation to Scotland. 4. Scottish Government categorisation of significance of proposals Category B. These Regulations are wholly concerned with the transfer of functions which previously rested with EU entities to relevant authorities within the UK. 5. Impact on devolved areas Our primary objective in working with UKG on these amendments has been to ensure that Scottish Ministers can continue to effectively manage these policy areas and that the devolution settlement is respected. The Scottish Government considers that the proposed instrument constitutes a pragmatic approach to addressing deficiencies in CAP and funding legislative provisions, arising as a result of EU Exit, and is the best option in the circumstances to ensure continued effective operation of these provisions to minimise the risk in the short term of disruption to devolved territories. The proposed Regulations respect the current devolution settlement by ensuring that Scottish Ministers can exercise all applicable functions under the retained EU law as modified by these instruments as the relevant authority in relation to Scotland. 6. Stakeholder engagement/consultation We are in regular contact with all our stakeholders regarding the move towards leaving the EU. However, these measures are part of a series of proposed instruments detailed above aimed solely at preserving the functioning of the law as it stands at present and, therefore, we have not undertaken any engagement, or any formal consultation, about these specific amendments. The UK Government have published a series of technical notices which provide details on how UK businesses and individuals should prepare in the event of a no deal Brexit scenario, including the following: 10

28 11 REC/S5/19/2/4 Annexe A A technical notice titled Guidance: Receiving rural development funding if there s no Brexit deal was published on 23 August A technical notice titled Guidance: Farm payments if there is no Brexit deal was published on 23 August In June 2018 the Scottish Government published a consultation Stability and Simplicity This consultation invited comments on Scottish Government proposals for dealing with the implications associated with coming out of the Common Agricultural Policy (CAP) which explained that the first stage would be retained EU law in domestic legislation. The consultation closed on 15 August 2018 with 137 responses received. Overall, respondents were broadly content for support to continue in its current form to ensure a transitional period of stability for the rural economy. An external stakeholder panel the Simplification Task Force is being established to look more closely at the responses to and opportunities for simplification of the retained EU law. The effect of the statutory instruments described in this notification is consistent with the proposals set out in the consultation. Separately, following the Stability and Simplicity consultation earlier this year, the Scottish Government is continuing to explore all the necessary adjustments and any other options for creating new legal powers which Scotland will need to amend, improve and, in due course, replace the current schemes at a suitable point after exit day. 7. Any other impact assessments? On the basis that these amendments do not result in any policy changes, no impact assessment has been prepared. 8. Summary of reasons for Scottish Ministers proposing to consent to UK Ministers legislation CAP If these deficiencies are not corrected in the scenario of a no-deal EU exit, the Scottish Ministers believe that we would no longer have an effectively functioning legal framework for continuing to provide for payments and the administration of the applicable payment schemes. This would likely cause problems for our stakeholders who need as much certainty and continuity as possible to help plan and operate their

29 12 REC/S5/19/2/4 Annexe A businesses. This could also pose risks for agriculture and the rural economy in Scotland. The Scottish Ministers propose to consent to this UK instrument to fix deficiencies in the relevant legislation. The approach set out in the UK instrument is realistic, achievable and minimises the risk of immediate disruption. The Scottish Ministers believe that, in the circumstances, consenting to the UK instrument would be the most effective way to help ensure continuity of current arrangements for stakeholders to assist them to continue to run their businesses, and ensure the existing regulatory regime can continue to function with scheme payments continuing to be administered and paid. The Scottish Ministers believe that the changes proposed by this instrument are necessary to secure continuation of effective regulatory regimes. The instrument respects the devolution settlement and provide for a transition from an EU to UK regulatory framework with devolved options for Scotland. The Scottish Government has worked constructively with the UK Government and the other Devolved Administrations and, in light of that, we are satisfied that the proposed amendments to the applicable legislation will ensure that it continues to operate effectively as retained EU law whilst respecting Scottish Government s devolved competence in relation to the implementation of CAP in Scotland. Given there is a need to prepare for a no deal exit from the EU, the Scottish Ministers consider that it is appropriate for the fixing legislation to be made on a UK-wide basis by the UK Government. This provides an effective achievable solution in current circumstances of limited resources and significant resource intensive legislative work needing to be completed in extremely tight time constraints. It also reduces the risk of conflicting provisions being produced by UK administrations that could result in confusion. The Scottish Ministers believe stakeholders need clarity and continuity in the immediate future in so far as possible to continue to operate their businesses during this period of transition and consenting to the proposed UK instrument is the most likely way of achieving that aim at this time. Maritime and fisheries It is necessary to correct the deficiencies in the Common Provisions Regulations to ensure that the EMFF programme can continue to operate effectively after exit day. The amendments made by these regulations align with the policy agreement between the Scottish Government and the UK government regarding the operation of funding under the EMDD regulation after exit day. The amendments in this instrument are technical in nature and do not represent a change in policy. 9. Are there governance issues in relation to this proposal, and how will these be regulated and monitored post-withdrawal? Following finalisation of the instruments, the Scottish Government will work with UK Government and other devolved administrations to put in place sound governance arrangements to ensure transparency and accountability for decision making. This

30 REC/S5/19/2/4 Annexe A work will be designed within the context of the principles, agreed by the UK Government, the Scottish Government and the Welsh Government on 16 October 2017, to apply to common frameworks. 10. Intended UK laying date The Agriculture (Transfer of Functions) (EU Exit) Regulations 2019 is subject to affirmative procedure and will be laid at Westminster on 22 January We are working with Defra on the basis that no EU Exit statutory instruments will proceed to be made, until after they have been through the consent process agreed with the Scottish Parliament. 11. Does the Scottish Parliament have 28 days to scrutinise Scottish Ministers proposal to consent? Yes 12. Information about any time dependency associated with the proposal It is essential that the proposed instrument is in force on the day we exit the EU in the event of a no deal scenario to ensure that legislation is operable. This is to enable the Scottish Government to continue to administer and regulate our schemes and make payments to our stakeholders. 13. Any significant financial implications There are not expected to be any significant financial implications associated with the proposed instrument. 13

31 REC/S5/19/2/4 Annexe B LETTER FROM THE CABINET SECRETARY, 21 DECEMBER 2018 Thank you for your of 13 December regarding the above notification. I am pleased to address the points the Committee has raised below, however in doing so it is worth noting that the CAP and the EMFF are very different schemes, in particular the EMFF is the only ESI fund programmed at a UK level with one UK Managing Authority. The powers being taken by the Secretary of State (for this Managing Authority) are purely (non-legislative) technical powers to allow the UK programme to continue to operate, and the powers already conferred to Scottish Ministers will not change during the period covered by the Treasury Guarantee. I would also reiterate that should we be leaving the EU on 29 March 2019 with no deal in place, the proposed statutory instrument is intended to provide for only short-term requirements. Following the Scottish Government s Stability and Simplicity consultation earlier this year, I can confirm my officials are continuing to consider what changes may be appropriate over the more long-term. (a)(with reference to the CAP Direct Payments provisions of EU regulation 1307/2013, the Maritime and Fisheries provisions of the EU regulation 1303/2013 and the CAP Financing Monitoring and Management provisions of the EU regulation 1306/2013) In each of these three cases, would the powers exercisable by the Scottish Ministers be made by regulations? What Parliamentary scrutiny procedures would apply to these powers? Answer for CAP and CFP provisions: In all 3 cases, we can confirm that the exercise of the powers by the Scottish Ministers as the appropriate or relevant authority would be by making regulations. We are continuing to discuss with the UK Government and the other Devolved Administrations what scrutiny procedures should apply to the exercise of these regulation making powers. Subject to the outcome of those discussions, we envisage given the technical nature of the powers that in most cases, negative procedure will apply. However, again subject to those discussions, we anticipate that affirmative procedure would be appropriate in a couple of cases, for example, amendments to the powers concerning application of financial penalties for non-compliance or to provide for derogations from direct payment scheme rules in an emergency. (b)in the cases where the current instrument would confer legislative powers on the Secretary of State with the consent of the Scottish Ministers in devolved areas, how will the use of the powers be scrutinised by the Scottish Parliament? Has it been considered whether joint procedure at Westminster and the Scottish Parliament would apply to those powers? Answer for CAP and CFP provisions: At the moment, where Scottish Ministers consent via section 57(1) of the Scotland Act 1998 to UK regulations implementing EU obligations, we inform the relevant Parliamentary Committee in writing. We are considering the process for scrutinising UK regulations made under provisions amended by EU Exit SIs or SSIs. Scrutiny of further regulations made under provisions amended by EU Exit SIs or SSIs is a matter still to be determined by the UK Government and the Scottish Government. The necessary processes will be developed in consultation with the Parliamentary authorities. 14

32 REC/S5/19/2/4 Annexe B (c) Would there be benefit to making the current instrument under joint procedure in terms of paragraph 2 of schedule 7 of the European Union (Withdrawal) Act 2018 to allow the Scottish Parliament to consider the scrutiny procedure that would be proposed for any regulations (or other form of instrument) to be made by the Scottish Ministers under the current instrument? Answer for CAP and CFP provisions: We do not consider that the joint procedure would be resource efficient for this SI given the time constraints we are working to for no deal planning. We will analyse the final SI when it is laid and will write to you in accordance with the protocol to advise whether the terms of the SI are consistent with the notification. (d) In relation to the maritime and fisheries aspects of Regulation (EU) 1303/2013, the notification indicates that only some of the maritime and fisheries legislative functions will be transferred to the Secretary of State. To where will the other legislative functions transfer? Which legislative functions will transfer to the Secretary of State and which elsewhere? Answer for CFP provisions: The non-legislative functions which are being transferred to the Secretary of State, as the single UK Managing Authority of EMFF, are to allow that body and the programme, to continue to operate on a UK basis. The remaining (non-legislative) functions stay with the Devolved Administrations as Intermediate Bodies and the UK Audit and Certifying bodies. Co-ordination between the Intermediate bodies and the Managing Authority will be delivered through the UK Programme Monitoring Committee (PMC) which the SG and Scottish Industry sit on. The Secretary of State will be required to seek consent from the PMC in all cases of proposed changes to the agreed functions. (e) In relation to the transfer of legislative functions under Regulation 1306/2013, how is it envisaged that the framework for ensuring co-ordination between administrations will apply? Will the Secretary of State be able to exercise legislative functions on behalf of the devolved administrations with their consent? Will that be the case where a framework for coordination is not considered appropriate? Answer for CAP provisions: Agriculture is a devolved matter and throughout this instrument the principle applied is that all functions relating to Scotland will be exercised by the Scottish Ministers except in areas where all UK administrations are in agreement that a UK-wide approach would be more appropriate. The proposed SI seeks to provide for this. Thus, the proposed SI will amend directly applicable EU instruments as it becomes retained EU law to make provision in relation to the exercise of functions previously conferred on the European Commission. It does so by providing for those functions to be exercisable by the appropriate or relevant authority. The appropriate or relevant authority means, in relation to Scotland, either - the Scottish Ministers; or - the Secretary of State but only acting with the express consent of the Scottish Ministers. I can confirm the Scottish Government will work with UK Government and other devolved administrations to put in place sound governance arrangements to ensure 15

33 REC/S5/19/2/4 Annexe B transparency and accountability for decision making and the operation of the UK common frameworks. I hope this has clarified the points raised, and will ensure the Committee is kept up to date on any future developments on any of these matters. 16

34 REC/S5/19/2/4 Annexe C NOTIFICATION TO THE SCOTTISH PARLIAMENT Name of the SI The Quality Agricultural Products and Foodstuffs, Spirit Drinks, Wine and Aromatised Wine (Amendments etc) (EU Exit) Regulations 2019 (the 2019 Regulations ) are a UK statutory instrument which will establish a UK Geographical Indication scheme which requires to be in place on Day 1 following the UK withdrawal from the European Union. It also addresses technical deficiencies arising from withdrawal from the EU, based on a presumed no deal scenario. The 2019 Regulations are largely reserved, however there are some minor devolved provisions in relation to Spirit Drinks, Wine and Aromatised Wine which are of limited policy significance. Statutory Instrument also amends an EU regulation in respect of the classification of the active substance intended for use in a biocidal product to be used in animal husbandry but not intended for use in a veterinary medicinal product. The majority of the EU regulation relates to veterinary medicinal products, which are subject to a specific reservation. Brief explanation of laws that the proposals amend This notification covers the 2019 Regulations which amend UK and EU legislation relating to geographical indications, wine, aromatised wine, and spirit drinks. The majority of the 2019 Regulations are reserved. The amendments relating to geographical indications, which form the bulk of the 2019 Regulations, are for the purposes of establishing a UK Geographical Indication Scheme, and such amendments relate to reserved matters. The amendments relating to wine, aromatised wine and spirit drinks which are mainly devolved are minor and technical and are for the purposes of fixing deficiencies in the legislation which will occur after the UK s withdrawal from the EU. In relation to the devolved wine, aromatised wine and spirit drinks provisions, this notification covers amendments to The Wine Regulations 2011, The Spirit Drinks Regulations 2008 (both UK wide statutory instruments, previously made by the UK Government in exercise of powers including section 2(2) of the European Communities Act 1972, relying on section 57(1) of the Scotland Act 1998), and to the following five EU instruments: Commission Regulation (EC) No 2870/2000 which lays down Community reference methods for the analysis of spirit drinks; Commission Implementing Regulation (EU) No 716/2013 which sets out rules for definition, description, presentation and labelling of spirit drinks; Regulation (EU) No 251/2014 of the European Parliament and of the Council which deals with the definition, description, presentation and labelling of, aromatised wine products; Commission Delegated Regulation 2018/273 and Commission Implementing Regulation (EU) 2018/274 which both deal with schemes of authorisations for 17

35 REC/S5/19/2/4 Annexe C vine plantings, the vineyard register, documentation and keeping of inward and outward registers for wine; and An EU Commission Delegated Regulation that has not yet been passed but which will replace Commission Regulation (EC) 607/2009, potentially coming into force before 29 March 2019, and will deal with product specification, labelling and presentation of wine. It should be noted that, should the EU Commission Delegated Regulation to replace Commission Regulation (EC) 607/2009 not come into force before EU Exit, it is agreed between the Scottish Government and UK Government that the 2019 Regulations will be amended accordingly. However, it is being highlighted in this notification to give the Scottish Parliament appropriate time to consider the provision should it be contained in the final version of the 2019 Regulations. In relation to biocidal products, the 2019 Regulation also amend Regulation (EC) No 470/2009 of the European Parliament and of the Council of 6 May 2009 laying down Community procedures of the establishment of residue limits of pharmacologically active substance in foodstuffs. Summary of the proposals and how to these correct deficiencies This notification covers proposals in the 2019 Regulations to fix deficiencies in the UK and EU instruments listed above, for example references to the European Union or EU that will not be relevant when the UK leaves the EU. The proposed policy solution is to omit references that will no longer be appropriate and replace with, for example United Kingdom where it is considered appropriate. The proposal is to amend the legislation only to the extent necessary to enable it to work in the UK after EU exit. For example, the amendments to The Spirit Drinks Regulation 2008 and Wine Regulations 2011 provide that representatives of the European Commission will no longer have any locus in being able to accompany authorised officers when those officers are exercising their powers of entry, as that would not be appropriate after exit. There are various provisions in the 2019 Regulations which transfer non-legislative functions in devolved areas, some to the Secretary of State to be exercised only with the consent of the Scottish Ministers, and some directly to Scottish Ministers or Food Standards Scotland. The 2019 Regulations also transfer legislative powers in Regulation (EU) No 251/2014 that relate to devolved areas to the Secretary of State but these can only be exercised in relation to Scotland with the consent of the Scottish Ministers. These legislative powers relate to the definition, description, presentation and labelling of aromatised wine products. There are no aromatised wine products produced in Scotland. The 2019 Regulations amend the procedure for the classification of a pharmacologically active substance intended to be used in a biocidal product in animal husbandry to fix deficiencies resulting from EU withdrawal. Such applications must be made to the Secretary of State, as opposed to the Commission. The classification of such substances are subject to the consent of the devolved 18

36 REC/S5/19/2/4 Annexe C administrations, in line with their devolved competence. This is consistent with approach which is being taken in the wider chemicals regime. The proposal is to amend the legislation only to the extent necessary to enable it to work in the UK after EU exit. The proposed amendments are minor, technical amendments and do not contain substantive policy changes. The provisions relating to transfer of functions in devolved areas appropriately respect the devolution settlement. Explanation of why the change is considered necessary The deficiencies addressed by the 2019 Regulations are minor and/or technical in nature, and include amendments to legislation regarding spirit drinks, wine and aromatised wine which relate to the administration of the enforcement regime, and the trade of drink products post EU exit which could be negatively impacted if the deficiencies were not corrected. The changes are necessary to ensure continuity of the administration and enforcement post EU exit. Scottish Government categorisation of significance of proposals Category B. The 2019 Regulations are in the main technical in their detail, for example amending references to EU and European Union and in reserved areas from Commission to Secretary of State. The 2019 Regulations update references which are no longer appropriate once the UK has left the EU and transfer functions which previously rested with EU entities to relevant public authorities within the UK so that these are instead exercisable at a domestic level. Given that some of the functions being transferred are legislative regulation-making powers, the 2019 Regulations fulfil the criteria for category B on the basis that they include Subdelegation creating or amending a power to legislate, for example transferring EU legislative powers to a UK public authority. Impact on devolved areas The Scottish Government s primary objective in working with the UK Government on the 2019 Regulations has been to ensure that there is an operational UK GI Scheme from day 1 post-eu Exit and that the devolution settlement is respected. The Scottish Government considers that the 2019 Regulations constitute a pragmatic approach to addressing deficiencies in rolling the EU legislation into UK Law, arising as a result of EU Exit. The 2019 Regulations respect the current devolution settlement by ensuring that Scottish Ministers have an appropriate role in relation to Scotland. However, as noted above the 2019 Regulations involve a mixture of reserved matters (which form the vast majority of the 2019 Regulations) and limited devolved matters. It is important to note in the case of wine, Scotland has no commercial winery operations, nor does Scotland produce aromatised wine. 19