Andrew Arbuckle: Like all of us, agriculture awaits the budgetary axe

THE unfortunate person had slipped and missed his footing whilst on the top of the skyscraper. As he hurtled towards the ground, his voice could be heard saying "now for the dunt".

I reckon this week we shall face the "dunt" that comes from living beyond our means, and that the new Chancellor's Budget will make a big impact on how we live in the future.

We have all seen it coming with the old political trick of softening up the actual announcement with dire warnings of cuts to all parts of public life.

When asked last week which parts of his budget he felt would come under pressure, Holyrood rural affairs secretary Richard Lochhead rightly pointed out that most of the rural cash came from Europe and that would help protect his share of government spending.

But he did fear that there would be cuts in part of the UK government's department for environment, food and rural affairs (Defra) budget that would affect Scottish farming, with one possible area being the animal health budget.

This long-running saga revolves around the situation where the Scottish Parliament has been given responsibility for policy on animal health and welfare – yet Defra holds the purse strings for this activity.

Last week, farming union leaders met with Michael Moore, the new Secretary of State for Scotland, and Jim Paice, the UK farming minister, to again press the case for a transfer of a fair share of Defra's budget so that funding and policy on the issue would be linked.

This was an issue the union had hoped to sort out before the demise of the last UK government but relations between the former minister and the farming leaders seemed to be fraught and nothing was achieved.

Even allowing for the tradition of giving the newcomers a honeymoon period to settle in, I was surprised by the warmth of the press release from NFU Scotland following their meeting with the newcomers.

It may be that most of Defra's problems, such as badgers and sorting out their support payment scheme, will only affect England

– but the big test of the NFU Scotland and Defra relationship will come not on home soil but with the attitude of the UK government to the reform of the European Union's common agricultural policy (CAP).

So far, the comments of Environment Secretary Caroline Spelman have been more along the lines promoted by the UK Treasury and that will lead to reduced funding for the CAP.

While Lochhead's response to reduced funding ducked under the shelter of the CAP, this issue is definitely coming along the track.

It will not arise this coming week, despite Dacian Ciolos, the EU commissioner for agriculture and rural development, coming to the Highland Show on his first visit to Scotland.

We can expect soothing words from the commissioner on the importance of Scotland within Europe and these words will be reciprocated by the Scottish minister – but the reality of a CAP with reduced funding looms large.

Also this week, Brian Pack will use the Highland Show as the backdrop to outline his latest thinking on how best CAP reform can suit Scotland.

Regardless of how cautious he is, it is inevitable his views will take the issue closer towards identifying winners and losers, with all the current recipients of single farm payments working out on which side of the equation they will be.

That is bad news for Lochhead, who now has only ten months before the Scottish Government faces an election and anything that might affect government popularity must be left until after May 2011. Already, if a national trade paper is to be believed, civil servants are urging Pack to consider the concerns of a group of farmers in the south west who fear the loss of their livestock sector with any move to area-based payments.

Apart from this being a strange position where a consultant (Pack) appointed by the minister (Lochhead) being advised by civil servants (nameless) on how the CAP should be reformed, the sensitivity of any overall proposal is clearly seen.

So while everyone wants the sun to shine on this week's Highland Show, the big issue is the financial background for the agricultural industry.

There will be a big "dunt" with immediate financial measures but even with a parachute to slow the change of the CAP, the slower drift down of support will be more relevant to the long term future of Scottish agriculture.