Richard Lochhead, the cabinet secretary, has set a voluntary modulation rate of 5%, rising to 9% by 2012. The money is to go towards the Scottish Rural Development Programme, a £16m investment package for agriculture, environment, forestry and community projects.
Despite fears that the modulation rate might reach 20% in total, NFU Scotland was pleased with the main thrust of the announcement, as the programme includes a wide range of benefits that will benefit farm businesses and the wider rural economy. In particular, NFU Scotland commended the commitment to support for hill and upland farms in Scotland's less favoured areas, increased funding for environmental schemes and measures to improve the competitiveness and profitability of farm business.
The voluntary modulation rate remains lower than rates previously tailed by the Scottish Executive and the equivalent rates announced in England and Northern Ireland.
"We have made it very clear to the new Scottish Executive that we expected a rural development programme that will meet the needs of Scotland's farming businesses and rural communities," said NFU Scotland president Jim McLaren.
"While the eventual rates of voluntary modulation will be higher than the current 5%, which we believe could still have delivered a meaningful programme, they average out at 8% over the period up until 2013 and are boosted by a significant increase in Scottish Executive funding to £1,113m, compared to £552m in the previous programme."
He continued: "At this time, the thing that farmers need most of all is stability. That is why we have been impressing on the Scottish Executive the need to keep modulation rates to the absolute minimum required."