Farming is important to rural Scotland - that at least most commentators would agree on.

Studies commissioned by rural local authorities have revealed the importance of the spending power of the agricultural sector to the rural economy. In Dumfries and Galloway, that most rural of lowland authorities, 11% of the working population is directly employed in farming and the contribution to GDP is over 20%. When agriculture is in recession and spending slows down, the feed merchants, vets, and auction marts suffer, but so do the car dealer and the hardware shop.

The countryside which so many are anxious to preserve, and which is fundamental to the tourism industry of Scotland, is the product of generations of farmers and foresters. Even the wildest parts of Scotland have a man-made landscape. Whether farmers like it or not, the fact that the countryside has to be managed is the strongest argument for public money supporting their industry. Other basic industries, such as coal mining and shipbuilding, have been allowed to fall victim to market forces, despite their importance in sustaining communities - the only thing that gives farming a stronger case is the argument that, unlike the

factory, you cannot shut down the countryside.

Yet, although the way the land is owned and managed is of such fundamental importance, the reality is that a gulf has opened up between the farming community and the rest of rural society. Farmers and landowners talk about urban society not understanding them - the truth is that a great many people who live in our villages and market towns have very little understanding of or sympathy with farmers. As employment in farming dwindled, farm cottages were sold off as second homes and processing factories such as the local creameries or slaughterhouses closed, and direct links between farmers and the rural worker weakened. Produce was often exported straight out of the region with no value added and absolutely no link between local consumer and producer. Farmers were seen as a privileged group, reliant on

public subsidy, whose conspicuous spending often contrasted with the deprivation of the villages.

But times are a-changing, and it's time to

re-integrate farming back into the rural economy. A new relationship has gathered momentum, one which the farming lobby seems reluctant to

acknowledge. Two-thirds of farm businesses now rely to some extent on outside earnings. This may be investment income, it may be pensions, it may be ''diversification'' income, but in many cases it is direct earnings by family members in outside employment. How many family farms are being kept afloat by wives who are teachers, nurses, or secretaries? As the profitability of the core food-producing business has shrunk, many farm businesses have moved from being employers of labour, through a stage as family-only employment units, to a point where they rely on outside employment. Part-time farming has not been a popular option in this country, although it is

traditional in many parts of continental Europe. In income terms it is now, however, a reality.

At the same time, many farmers see the value of encouraging local consumption of their goods. Local provenance, regional branding, are seen as powerful marketing tools. The public is interested in food - can it be persuaded to pay a premium for local, fresh, quality, traceable food? That is the driving force behind the local food festivals and farmers' markets springing up all over Scotland.

Farming is at a crossroads. It is unprofitable and its subsidy-underpinning is under pressure from WTO negotiations and EU enlargement. It will probably go in two directions - restructuring into ever-larger agro-businesses and multi-activity farming. Farmers in the UK tend to look to Australia, New Zealand, and North America for blueprints, but the environmental differences between the grass-growing environment of New Zealand, the bread-baskets and feed-lots of the North American mid-west, and even the most favoured parts of Scotland are real. The alternative

European model of multi-functional farming -

co-operative, often part-time, maximising the appeal of local diversity, and seeking every opportunity for supplementary income both on- and off-farm - is worth at least equal consideration.

Are the NFU, the SLF, and the Scottish Rural Affairs Department up for this change? Sadly, the evidence to date says no. European regions have been working on six-year Rural Development Plans to utilise the so-called modulation monies. These are the very small percentages of direct product subsidy (up to 4.5% by year six) which are being matched by Treasury money and

redirected to other support measures, such as environmental payments. Because of the history of the past 20 years, the budgets available in the UK are small compared to other countries and completely inadequate to the task, but at least it provided an opportunity to begin to see agriculture as part of a wider rural agenda. What has been the response of the traditional farming lobby? The NFUS has described a small reduction in subsidy as ''a tax on farming'' and has pressed the Scottish Executive into restricting its scope to on-farm activities. Contrast this with Eire, where a 200-point action plan for rural development has just been announced, with substantial European and Irish government funding.

In England, a multi-faceted Rural Enterprise Scheme, supported by MAFF, has been launched. There is pain in the changes, but there are also

opportunities.. If family farms are to survive and a younger generation of farmers to have a chance, they will need to exploit every income-generating opportunity, including those beyond the farm gate. It's a pity that the industry's leaders and its specialist Ministry in Scotland don't see it that way.

n Joan Mitchell is leader of the Liberal Democrat Group on Dumfries and Galloway Council, and a member of the Agriculture, Fisheries and Rural Development Commission of the EU Committee of the Regions.