Joint Committee on Communications, Natural Resources and Agriculture

03/May/2012

Prelude

Sustainable Energy Act 2002: Motion

Messages to Dáil and Seanad

Reform of Common Agricultural Policy: Discussion with Irish Farmers Association

The Joint Committee met at 09.30 a.m.

MEMBERS PRESENT:

 Deputy Tom Barry,  Senator Michael Comiskey,
 Deputy Michael Colreavy,  Senator Paschal Mooney,
 Deputy Pat Deering,  Senator Mary Ann O’Brien,
 Deputy Michael McNamara,  Senator Pat O’Neill.
 Deputy Michael Moynihan,
 Deputy John O’Mahony,
 Deputy Ann Phelan,

 DEPUTY ANDREW DOYLE IN THE CHAIR.

Chairman:  Apologies have been received from Deputies Martin Heydon and Éamon Ó Cuív and Senator Brian Ó Domhnaill. May I remind members to switch their phones off completely. We will deal with the motion on the Sustainable Energy Act 2002 (Section 8(2)) Conferral of Additional Functions - Renewable Energy) Order 2012.

I welcome the Minister for Communications, Energy and Natural Resources, Deputy Pat Rabbittee and his officials. The motion before us has been referred by both Houses for consideration and members will have received a briefing note on it.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.

Minister for Communications, Energy and Natural Resources (Deputy Pat Rabbitte):  I thank the Chairman. As I understand it, subject to correction, we are essentially only dealing with a statutory instrument that we enacted approximately this time last year. We are undoing it because my Department has discovered that the necessary formal resolution was not taken the last time. It concerns the conferring on the Sustainable Energy Authority of Ireland of additional functions in respect of information and training. There is a technical and procedural requirement to do it the right way by passing the resolution and reporting it to the House accordingly. I presume all the members of the joint committee have seen the actual statutory instrument. As a result of the directive, certain functions must be transposed. The Sustainable Energy Authority of Ireland is taking over that function. Some of the members will be familiar with the work of the authority since its enactment. It already has a fairly extensive list of duties and functions. The motion before the committee will give the authority an additional role in terms of information and training. It has been introduced in order to be procedurally correct in advance of the statutory instrument being laid before the House. If members have any questions on it, I will do my best to answer them.

Senator Paschal Mooney:  I would like to ask a brief question about the use of the word “information” in this context. Am I right in suggesting that the Sustainable Energy Authority of Ireland is involved in, or has embarked on, an information campaign to inform people? Is that the context in which the word “information” is being used? Is the Minister merely giving legal effect to that, more or less? Is it the case that the authority is doing this anyway but is now-----

Deputy Pat Rabbitte:  Yes, that is right. The authority is doing this anyway. It is providing information, etc. The objectives of the authority are set out in the Sustainable Energy Act 2002, which provides that one of its first functions shall be “to promote and assist energy efficiency and renewable sources of energy”. The Senator is quite right to suggest that the authority has, in effect, been doing this from the beginning. This statutory instrument confers specific additional duties on the authority in this regard.

Senator Paschal Mooney:  Does this measure infer that the information campaign is to be ratcheted up, or is it purely a legal instrument? I appreciate that is a separate question.

Deputy Pat Rabbitte:  To be honest, I would not say the provision of information is being ramped up. The authority does a pretty good job in that respect. It is very accessible. Its website is especially good. This is more of a legal instrument than a suggestion that the authority will ramp up its normal furnishing of information.

Deputy Michael Colreavy:  I understand the need for this measure. I accept it is a technical change. I would like to ask the Minister to do something. Perhaps it is not within the remit of this motion. I recently attended a meeting with workers from Irish Cement, who have alleged that Irish Cement has gained approximately €600 million through carbon refunds over the last ten years. Will the Minister examine the legislation? I do not think it was designed to help companies to make profits from carbon refunds.

Deputy Pat Rabbitte:  I will examine it. I suspect that the case mentioned by the Deputy probably relates to the rebate that exists for large energy users.

Deputy Michael Colreavy:  It probably does.

Deputy Pat Rabbitte:  It is due to expire in September of this year.

Deputy Michael Colreavy:  Will the Minister examine the matter?

Deputy Pat Rabbitte:  I will indeed.

Deputy Michael Colreavy:  It should not have happened.

Deputy Pat Rabbitte:  I will write to the Deputy.

Deputy Michael Colreavy:  I thank the Minister.

Deputy Ann Phelan:  My question relates to the fact that the Sustainable Energy Authority of Ireland is also a certification body. Will this measure have any retrospective effect on certification that the body has issued to date?

Deputy Pat Rabbitte:  No, it will not. We have double-checked that. We have got clearance on that. It will not.

Deputy Ann Phelan:  Okay.

Chairman:  I take it that the joint committee recommends there should be no further debate on the motion by Dáil Éireann or Seanad Éireann. Is that agreed? Agreed. That concludes our consideration of the motion.

Deputy Pat Rabbitte:  I will be pleased to receive more invitations of this nature from the Chairman.

Chairman:  This is the other extreme, compared to what we are used to.

Deputy Michael Colreavy:  The Minister should not take this as a precedent.

Deputy Pat Rabbitte:  No, I will not.

Chairman:  It is a record. I thank the Minister.

Chairman:  In accordance with Standing Order 87, the following message will be sent to the Dáil:

The Joint Committee on Communications, Natural Resources and Agriculture has completed its consideration of the following motion:

That Dáil Éireann approves the following Order in draft:

Sustainable Energy Act 2002 (Section 8(2)) (Conferral of Additional Functions — Renewable Energy) Order 2012,

a copy of which Order in draft was laid before Dáil Éireann on 30th April, 2012,

In accordance with Standing Order 72, the following message will be sent to the Seanad:

The Joint Committee on Communications, Natural Resources and Agriculture has completed its consideration of the following motion:

That Seanad Éireann approves the following Order in draft:

Sustainable Energy Act 2002 (Section 8(2)) (Conferral of Additional Functions — Renewable Energy) Order 2012,

a copy of which Order in draft was laid before Seanad Éireann on 18th April, 2012.

Sitting suspended at 9.45 a.m. and resumed at 10.05 a.m.

Chairman:  I welcome from the Irish Farmers’ Association Mr. John Bryan, president, and Mr. Pat Smyth, general secretary. Mr. Bryan and Mr. Smyth may be aware that departmental officials and three Irish Members of the European Parliament, Ms Mairead McGuinness, Ms Marian Harkin and Ms Phil Prendergast, appeared before the joint committee earlier this week to outline their perspectives on the reform of the Common Agricultural Policy, CAP. The committee plans to continue hearings on this issue in the coming weeks and to forward to the European Parliament before the end of May a short political contribution on the issue. We hope this will allow the cross-party view of the joint committee to be taken into consideration as negotiations on CAP reform continue.

I draw to the attention of witnesses that they are protected by absolute privilege in respect of their evidence to the committee. If they are directed by the committee to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to a qualified privilege in respect of their evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against a member of either House, a person outside the House or an official by name or in such a way as to make him or her identifiable. Members were reminded earlier of the position regarding privilege. I ask Mr. Bryan to make his opening statement.

Mr John Bryan:  The Irish Farmers Association appreciates this opportunity to address the joint committee. The reform of the Common Agricultural Policy is of major importance to farming, agriculture, family farms and the economy. The CAP has been vital to producers and continues to provide European consumers with a plentiful supply of high quality, sustainably produced food. The policy has undergone significant reforms since its inception, prompted by the demands of European consumers, and farmers have responded by providing high quality, sustainably produced food at reasonable prices.

The Common Agricultural Policy has a multi-functional policy role and provides benefits in a number of key areas. For consumers, it provides security of food supply, price stability, guarantees on food safety and traceability and assured environmental and animal welfare standards. Through the rural development policy, in particular, it maintains economic activity in remote areas, thereby providing a vital support to rural society in Europe. Under the Common Agricultural Policy, farmers meet high environmental standards for sustainable food production and land management and, in return, the CAP provides support for the continuation of the family farm model of production in the European Union.

Agriculture and the agrifood business are very important to the Irish economy. Last year, the IFA commissioned University College Dublin to carry out a study of the value of agriculture and agricultural output. The findings identified that agriculture and the food industry employ more than 300,000 people in Ireland, are worth €25 billion per annum to the economy and generate exports valued at more than €9 billion per annum.

With the world population set to reach 9 billion by 2050 and demand for food set to double, a strong Common Agricultural Policy focused on food production is essential. The best way to achieve food security for Europe’s 500 million consumers is to maintain our production capacity in Europe. Preserving the EU family farm model of production will be key to achieving this objective. Strong supports for food production are in place in all developed countries, including the United States, Japan and Australia. In the past two weeks, I visited China as part of a trade mission and it is clear that it, too, is investing in agriculture. To sustain food production for a growing world population, it will be essential to maintain a properly funded Common Agricultural Policy.

Speaking at the annual general meeting of the IFA in January, the Commissioner for Agriculture and Rural Development, Mr. Dacian Ciolos, detailed his proposals for reform of the CAP post-2013. Although he stated his proposals were based on three core principles, namely, viable food production, environmental balance and territorial cohesion, the text of the Commissioner’s proposals did not support the achievement of these principles. The Irish Farmers Association highlighted to Commissioner Ciolos the highly damaging impact his proposals would have on agricultural production, farm income, exports and jobs. It is disappointing that the Commissioner has remained committed to his proposal for a flat rate payment system to replace the existing model. The IFA is determined that the CAP must support active farmers and the role the agriculture sector is playing in contributing to our economic recovery in delivering on the Food Harvest 2020 targets. With exports of €9 billion from the agrifood sector in 2011, it is in Ireland’s interest that growth continues. The Government has been strong in looking for a full CAP budget for Ireland and to ensure funding supports the productive base. The Taoiseach has a crucial role to play in the upcoming negotiations on the budget, as well as our Members of the European Parliament. It is critical that significant changes are made to the Ciolos proposals in order that CAP reform works for Ireland.

The context for reform of the CAP is different from that in previous years in that the CAP budget is not yet known as negotiations on the overall EU budget from 2014 to 2020 have not concluded. With lower growth prospects, pressure may return on the overall EU budget for the period 2014-20; however, the opposite must be argued also, as funding from the CAP budget underpins economic activity across rural areas in Europe. It is critical that in the event of there being downward pressure on the EU budget after 2014 policymakers maintain a fully funded CAP budget. It can be justifiably argued that the increase in the CAP and EU budgets is a credible way of stimulating badly needed economic activity and job creation in Europe. It is vital, therefore, that Ireland retains its full allocation of €1.8 billion in CAP funding. Once the CAP budget and member states’ allocations are decided, the issue of most importance to farmers is how the single farm payment will be distributed internally.

The Commission’s proposals as set out will undermine active producers and interfere with farmers’ normal business decisions. The proposal for a uniform per hectare payment on a national or regional level is unacceptable. It takes no account of major differences in the productive capacity of land or levels of investment and commitment by individual farmers. In general, the current payment model in Ireland closely matches production levels on farms. This is supported by Department of Agriculture, Food and the Marine figures. Given the variance in the existing distribution of payments, the results of this proposal would be major disruption in payments for individual farmers across a very short time period. This income affect has been clearly identified. The speed and scale of the income drop alone would impact on the production decisions of many farmers, their capacity to repay investments and the viability of their farm businesses. It has been suggested by some commentators that this may not be a problem in that some farmers would lose out, some would gain, while overall the impact nationally would not be negative. Clearly, this is not correct. Figures show that more than 50,000 farmers would lose one third of their payment, 75,000 could gain a lower percentage, but the 4.5 million citizens of Ireland and the taxpayer would lose substantially by the effect on production and economic activity. A uniform payment only makes sense in a context where there is uniformity in other factors that impact on farm output and income such as land and returns from the market. Clearly, this is not the case for Irish agriculture. Therefore, a flexible payments system linked with the original system allowing for gradual adjustments over a long timeframe provides an option to minimise disruption at farm level and maximise production at national level.

The IFA supports the national reserve to target extra support at productive farmers who expanded their businesses and may have low entitlements. The association is also in favour of supporting young farmers based on objective criteria and the option of having coupled payments of up to 10% to underpin viability in vulnerable sectors. The Commission’s proposal to use 2014 as a reference year is causing major disruption in the land leasing market in Ireland. To address this issue, further changes are required to allow member states to set their own reference year.

The other issues of importance to Irish farmers are, namely, the proposed greening measures, rural development and emergency market support measures. The EU proposal to use 30% of the single farm payment for greening measures and allocate this on a flat per hectare basis in the first year will cause a significant reduction in payments for many farmers and is totally unacceptable. A separate payment for greening measures as proposed would involve significant additional bureaucracy, administrative and processing, leading to substantial payment delays and extra costs of compliance for farmers. The existing cross-compliance and GAEC measures which are applied by all farmers in respect of direct payments contain significant greening measures. These include the prevention of soil erosion, maintenance of soil organic matter and protection of groundwater. Greening measures must be incorporated into normal farming practices and included as part of cross-compliance in GAEC measures for the single farm payment. Farmers should be able to choose from a menu of practical greening options on an annual basis.

Ireland has traditionally participated strongly in the rural development programme. In the discussions on the single farm payment it must not be forgotten that the rural development programme brings almost €600 million annually through EU funding and national co-financing measures to several vulnerable areas in Ireland. Funding under the next programme must take into account past performance of member states, as well as objective criteria. In addition, the level of co-financing must remain at the standard 50% EU-national Exchequer funding for all measures. Adequate funding must be provided to ensure payment rates across all measures are at a level which allows effective implementation.

The key priorities for rural development must be agri-environmental measures, support for less favoured areas, on-farm investment and innovation programmes. The LFA review must allow flexibility at member state level to reflect a country’s specific natural handicaps. We must protect all existing designated areas. Emergency market support measures are used to put a floor on prices at times of price collapse. We saw this during the dairy crisis in 2009. Schemes providing for private storage, intervention and export refunds are effective in easing market difficulties. Additional funding must be allocated, as the agricultural crisis reserve fund is not adequate.

Reform of the Common Agricultural Policy is nothing new. Farmers have shown an ability to adapt and respond to consumer demands and changing environmental policy. The current proposals are inflexible and have the potential to seriously undermine the growth potential of Irish agriculture and the viability of thousands of full-time farmers. What is required is a flexible approach that will allow individual Governments the flexibility they need to adopt an approach that works and suits their agricultural production patterns and for any changes to be introduced over a long timescale with minimum movement.

Deputy Michael Moynihan:  I welcome the representatives from the IFA and thank them for their contribution. For the next 12 months one of the major issues for the agriculture sector will be how the CAP negotiations will pan out. They will a huge impact on its economic basis. No doubt the president of the IFA has seen the contributions of departmental officials and MEPs on Tuesday last. Given its intelligence network in Brussels, what are IFA concerns about the budget? Certainly, the MEPs gave the impression that there was huge concern about the budget agreed in June 2011.

The other issues that have arisen constantly at farmer meetings have to do with the greening proposals. Given that new proposals have been submitted by Ireland, it would be useful to know what the IFA’s thoughts are. There is no doubt that the system proposed, as announced in October, if adopted, would have major consequences for agricultural production not only in Ireland but also throughout Europe. What does Mr. Bryan see as the amendments that would best suit the IFA and the agricultural community as a whole? There is no doubt that rural development funding has contributed enormously to rural development. People who work in rural development have said these funds from Europe have made a huge impact on enterprise and on community development. Perhaps Mr. Bryan can give the committee his insight on those questions and I might get an opportunity to come back again.

Chairman:  Certainly.

Deputy Michael Colreavy:  I welcome the witnesses. It is good the IFA representatives are here with us. There is not a whole lot of difference between what “Ireland Inc” is trying to get with the CAP reforms and what the IFA is looking for. I have a few issues I would like to tease out a bit more with the witnesses.

Some people have expressed concerns, rightly, that the overall EU budget, given that it has not been decided, could adversely affect the budget for CAP. Do the witnesses think the Government should be making a stronger case for fixing the CAP budget, irrespective of what happens to the overall EU budget? I am particularly concerned that if cutbacks take place, they would be targeted at the rural development policy. It might be considered, wrongly, that the impact would not be as immediate. The IFA and the Government need to fight strongly to ensure rural development policy is not damaged, because that has the potential to have a devastating effect.

It seems clear the Commissioner is committed to moving towards a flat rate payment. The Government and the IFA have serious concerns about this. Could we be doing something more to try to present a model which would achieve some of what the Commissioner is trying to achieve, but over a longer timeframe? It is a question of making it easy for the Commissioner to do the right thing. Has the IFA been in discussions with any of the farming organisations from the other EU states about this?

The definition of active farmers is causing serious concern in my area. It has been tied in with the changes to the stocking density eligibility requirements, and many are concerned we are moving to a situation where unless the bulk of the income is coming directly from farm production, people will be rendered ineligible for support under CAP. The Government, the IFA and the EU need to be very clear on the definitions of active farmers. Those definitions need to be agreed with the member states and need to be discussed widely with those who are involved in agriculture in Ireland and the other member states.

Deputy Michael McNamara:  Does the IFA have a position on the proposals being bandied about for ecological focus areas? In particular, there is a proposal on pooling farms into areas, which has the possibility at least to mitigate the effect of greening on the most productive farms. Mr. Bryan mentioned in his presentation that the proposals failed to take into account the differences in productivity from one farm to another. Would the IFA support other proposals being bandied about that the greening requirements not be imposed on farms under a certain size? The average EU farm size is one such proposal. Would that have a positive or adverse effect on Irish agriculture?

Deputy John O’Mahony:  I welcome the witnesses and thank Mr. Bryan for his presentation. An overall picture is emerging of what is needed for Ireland, both from the farming organisations and from the Government. The big elephant in the room, as Deputy Moynihan mentioned, is the overall budget. Everybody was pleased when the Commissioner said the same money would be available, but that is the first battle that has to be fought. All these other negotiations are based on that fact.

The witnesses obviously welcome the involvement of young farmers. Would this be facilitated by incentives for older farmers to pass on their land? I know the Minister is interested in supporting that in legislation. Mr. Bryan spoke about the IFA’s support of the national reserve fund for productive farmers who have expanded their business and who may have low entitlements. Who exactly is he talking about in that respect? He did not mention farmers in restricted or designated areas. What does he think of the importance of supporting them? Farmers do not mind being restricted if they are compensated, and that is a very hot issue in my area at the moment.

The amount of bureaucracy for farmers is obviously an issue. They have to jump through so many regulatory hoops and so on. The need for flexibility on the distribution of payments is emerging from all sides in this debate.

Deputy Ann Phelan:  I welcome the witnesses as well. All the points I would like to make have been made. We have always argued, even in respect of other issues coming from the EU, that Ireland has a special case. The idea that one size fits all just does not apply. A perfect example of that was the nitrates directive. We argued that weather patterns in Ireland are quite dissimilar to those in Europe.

Rural development is very important in my constituency. Like Deputy O’Mahony, I would like to comment on disadvantage and farmers working under constraints. How will this affect them in future? There is a pattern emerging whereby we realise there will be cutbacks. How do we balance Food Harvest 2020 against this backdrop? We say Ireland is going to pull itself up and we are all depending on agriculture to do it, but there is a picture developing on cutbacks. We must be clear about what we want, because this is very important for Ireland. I do not think we will get a second chance. To begin the process we need to be very clear on the results we want to get.

Senator Pat O’Neill:  I welcome the delegates. When we do not know what the budget will be, it is very difficult to discuss CAP reform. Major issues need to be resolved before the budget is announced. We are facing into the most important year for agriculture in terms of negotiations. I wish the Minister and the leader of the IFA the best of luck because those negotiations will define the type of agriculture we will have in this country over the next ten years.

As Mr. Bryan and Deputies have pointed out, we have many different types of weather and land in this country. We have intensive and extensive farms, lots of land which is designated disadvantaged and needs to be protected and land which is driving production. In terms of CAP negotiations, we have always been based on an historic scheme of production linked to payments. It has worked well over recent years. We cannot put it back to a base year of 2002 but it has to be considered.

People who increased production and took out loans will be brought into a new scheme. Others who have decreased production will lose out. With quotas being removed in 2015, we will not have proper support, especially for certain types of land. The country could become totally reliant on the dairy industry. I would not like to see that happen because the beef and suckler industry is a major exporter, has helped the quality of food and given us a great name around the world.

I have told the Department and IFA at other meetings that they have to play a lead. There are many different types of production and farmers in the country and not everybody will be happy. The IFA has to try to get its members on side because if Europe sees division in our farm organisations, it will exploit it to weaken the case our Minister can make. Flat rate payments will not work for this country, something which has to be emphasised. The IFA needs to get its members on side in regard to what type of schemes we want to have. We are facing one of the most important years for agriculture in ten years because it will define the direction agriculture will take in the next ten years.

Senator Michael Comiskey:  I join my colleagues in welcoming my former colleagues. It is good to have them with us again. Many points have been made. It is vital we sustain our budget. Young farmers have to be looked after and that will happen. We have to consider doing something about farm retirements and perhaps encourage partnerships between older farmers to allow younger farmers to farm alongside them, even though in some cases they may not be related.

Farmers who have been farming over recent years with very low or no entitlements have to be looked after. I know a few such farmers who receive no entitlements. They are still farming and find it very difficult.

Senator O’Neill referred to the flat rate. We may not be able to achieve a full flat rate throughout the country but there may be a formula where we could take a percentage off the top and give it to the farmers at the very bottom to try to lift their payments. In disadvantaged areas which have been badly affected by destocking we have to try to sustain farmers. Deputy Colreavy touched on the issue of stocking which affects areas which have been destocking. We need measures to keep people in Ireland and support them. The rural development fund is vital from 2014 to 2020.

Mr John Bryan:  The most crucial thing with which we are involved is the budget. If one does not have money, one will not get out of the traps to change a car, build a shed or anything else. As was said in June and July last year, it looked like the Commission threw out an indicative figure for the budget. The problem is it only has an advisory role. The Parliament has a say and the Heads of State are those who have a real say. That is why I said in the presentation the Taoiseach has a critical role to play. The relationships he builds with the prime ministers of Germany, France, the UK and other countries are important.

Some countries like the UK and others will always try to cut the budget but we have to make sure the Taoiseach is very clear. As Deputy Colreavy said, the Taoiseach needs to emphasise that the CAP is vital for employment across Europe. At a time when the rate of unemployment is 25% in Spain and jobs are threatened, it is essential that the CAP is protected. It is important that Heads of State come out openly and say that for reasons of food security, employment and the public good, the protection of the CAP budget is important I expect the negotiations will take place in late November or December. The French election will be over and I will not presume the result. The new President of France and Prime Minister of Germany will be in office. Decisions have to be made early next year or the opportunity will be missed.

We are concerned about greening. Like every other bureaucrat I have ever met, the Commissioner started by saying things would be simplified. Hundreds of pages of extra bureaucracy were produced which referred to turning one scheme into two and new cross-compliance rules. The Commission’s calculations estimate the ecological set-aside will result in a drop in food production in Europe when we are told we need more food to feed the world. The thrust of the greening proposals run counter to the proposals to feed Europe and the world.

There is increased pressure on water in South America, Australia, North America, and in France and Spain at the moment. There will be pressure to feed the world’s population and Europe has a duty to feed its population. The CAP has served the European taxpayer very well over the past 50 years, something which is often missed. European taxpayers pay less than most others in the world for food as a percentage of family income. The weekly household spend on food is between 11% and 13% in Europe but in other parts of the world it is between 25% and 50%.

There are benefits for the public and employment. We propose greening should take account of the fact that one can fly into Dublin, Shannon or Knock and drive hundreds of miles in any direction. It is a perfect example of greening. We have permanent pasture, hedgerows, biodiversity streams and stone walls. Compared with most of the rest of Europe, we have delivered on greening which needs to be acknowledged.

We need the flexibility that will acknowledge what has been done and not set new theoretical targets. That is why we refer to a menu of options which would mean a country like Ireland with higher environmental standards than the rest of Europe, never mind the rest of the world, would be acknowledged. We should not reduce production and impose extra costs.

A few Deputies referred to change. Any change needs a very long timeframe. The Commission proposed a huge jump in 2014, namely 30% of greening and 60-40 flattening. For farmers with substantial borrowings and investments it would result in a 50% or 60% cut in payments in year one. That would have an effect on their investment. Some of them with substantial borrowing would be pushed out of business. The banks are already reflecting a concern. Senator O’Neill referred to the cattle sector. Many of those farmers, if they had not a good single farm payment, could not go to the mart to buy because the bank would not allow them do so. We have to bear in mind the effect of the timeframe on production.

Some speakers suggested reducing percentages substantially and looking at the option, as Senator Comiskey said, of taking a little off the top and adding it on to the bottom at a slow gradual pace and minimising the disruption. Commissioner Ciolos’s proposal will undermine our productive base. He is coming from a country that did not have the benefit of the Common Agricultural Policy, CAP. Romania and Bulgaria entered the system too late and farming there shows all the signs of not having a properly funded CAP. We benefited substantially from single farm payment and rural development funding which gave us our level of economic activity and investment, whether in farms or in stock levels. Many farmers in Romania and Bulgaria still use horses and carts because they did not have the benefit of those additional payments over the years. There seems to be a move to pull us all down to the lowest common denominator. We have a competitive advantage because of the investment we have made. By leaving that where it is, we will grow our dairy, beef, sheep and grain production but if we undermine that base we will damage production. There is a move to level everyone down, which I do not believe in.

When we make this point to the Commissioner he says, “Go regionalisation”. We know the damage that would do in different parts of the country, such as Deputy O’Mahony’s or Senator Comiskey’s own areas. Regionalisation would wipe some lads out. That is why we are trying not to go down that route. We are trying to get the flexibility that will adapt us to what is going on. Rural development measures can be used to bring up some farmers’ incomes. Deputies O’Mahony and Colreavy and Senator Comiskey said there are farmers on some land types who do not have the capacity to increase production. We must use the rural development measures to bring up their income and leave them at a sustainable level.

We are, collectively, trying to wear the green jersey. This is about jobs and exports. At a time when the Irish economy is under such pressure, we have a collective responsibility not to damage the productive base and not to damage jobs and exports. The economy is on shaky ground and the last thing we want is some event, whether internal or external, that will do serious damage and result in a drop.

The Government has an important role to play. I agree that the Taoiseach should be suggesting that the CAP cannot be touched. We must fight strongly to maintain the rural development policy. We have a strong history in this regard. I remind the Minister and the Government that even in the 1980s, when money was scarce, we paid disadvantaged area payments. This is not a time for the Government to cut the Leader programme. It is a time to support rural development and to send a signal to Europe that we want to have a properly funded rural development programme. That is very important.

The Commissioner likes the flat payment model, but no two farmers are the same. One farmer will borrow money to build sheds and to put cows in calf while another man, whether because of age or other reasons, will decide not to do so. One cannot give the same level of support to a lad who decides his business is not producing food as to the man who is creating employment and exports and is making a huge contribution to the economy. The farmer who builds the shed, puts the heifer in calf, puts the ram with the sheep or milks cows creates substantial employment and added value to the economy. We have to protect that.

We are trying to get a compromise with the Commissioner and we are working with other farming organisations, as Deputies have suggested. We sat down with the French and the Austrians. On Monday next we will bring some of our county chairmen, who represent our 29 executives, to meet the president of the German organisation. We have met the Austrian farming organisation. We work with the other farming organisations to find like minded countries. There are 27 members in the EU. Of them, 12 are new member states which are already on a flat model. Of the 15 other member states, about ten, like us, are on the historical model or variations of it and five are not. Of those ten, Ireland, Austria, France, Belgium, Holland, Denmark, Italy and Spain have serious problems with the Commission proposals. There is an alliance for change and for productive agriculture to create employment.

I understand what was said about active farmers. My view of an active farmer is a lad who is willing to work. I do not care what off-farm job he has. That has nothing to do with it. Whether he has sheep on lowland or a hill, or cattle is not important so long as he is a working farmer and is not someone who looks out the window. It is important that farmers be involved and creative. Every member of the committee referred to the budget. We want to justify the budget. It can be justified on the basis of food security, and feeding half a billion people with top quality food. An active farmer is the man who is working to create employment, which is very important. We must support the man who is willing to invest in his business.

Deputy McNamara referred to greening. It is too bureaucratic at present and will restrict production. Some of the Commission’s more ludicrous proposals are even welcomed on the basis that by reducing production they will increase prices. That makes no sense at a time when there is pressure to feed the world’s population. Greening must acknowledge what we have done in Ireland. I have spoken to Mr Georg Håusler, chef de cabinet to Commissioner Ciolos, a few times along the lines of Deputy McNamara’s proposal. I told him that in Ireland we have the highest level of permanent pasture in Europe. Most countries have less than 30%. We have three times the European average. We have more biodiversity and more than ecological set-aside, if one includes all our regions. He would not consider that. I proposed that we could tick the required box because the country is well above the level of permanent pasture. He would not agree and said every individual farmer must comply.

This brings us back to the question of farmers below the EU greening average. Commissioner Ciolos is totally committed to greening. He is determined that this is how he will make his mark. He says every farmer, whether he has half a hectare in Romania or 2,000 hectares in the Czech Republic, must take on some level of greening. Some of it makes no sense but that is where it is going.

Pooling farms in some kind of partnership is not a bad idea. We need to do something on that. We have made several proposals on taxation and other areas. There was an inequality, even in last year’s budget. A dairy farmer who had a partnership got a tax exemption while a beef farmer did not. That inequality needs to be dealt with immediately. If we want to see partnership, whether of tillage farmers or sheep farmers, we must encourage it and not simply make a rule that covers only a small number of farmers and excludes most. That needs to be dealt with.

It cannot be repeated too often that the budget is what this game is about. We talk about redistribution from the 15 old member states to the east, but there is already redistribution. Cutting the budget will create a level of discontent in eastern Europe, where there is a huge bloc of countries, led by Poland, that will have a big influence on the budget. They are gaining a certain amount under the Commission’s proposals of June and July 2011. If the overall budget is cut, every gain they expected to get will be gone before they start and they will be starting on a lower base. There will be some row if everyone is substantially cut before we start. The budget is imperative and we need to focus on that first.

The Commission made the proposal to stand still. The Parliament is much more supportive than it was a few years ago. I appreciate, Chairman, that MEPs attended the joint committee recently. We work closely with all MEPs. It is important that they are out front. It is repeated again and again in the Parliament that the CAP must be about food security and employment. In that context, we must defend and prioritise the CAP budget.

Two areas are being spoken of with regard to young farmers. The first is a top-up on the level of payments. The second is substantially higher rural development grants. Farmers under a certain age who are starting up and do not have the opportunities some of us had to invest in various modernisation schemes would get a higher level of grant, plus a top-up. Across Europe, there is not as much support for this as we would like. We have strong representation in Brussels and we have inquired about an early retirement scheme. The emphasis seems to be on bringing in young farmers but the same effect can be achieved if this payment is increased and they get a higher level of grant. National legislation is very important here. Agricultural tax relief for the passing over of farms must be retained.

I agree that there are complications regarding restricted areas. One concerns stocking density. We have had several meetings with the Minister for Arts, Heritage and the Gaeltacht, Deputy Deenihan, to try to have those restrictions reduced, at the very least. There must be compensation. I agree that there is a long accepted agreement in Ireland between Government and farmers that there should be no designation without compensation. REPS, the agri-environment options scheme, AEOS, and coupling all add to that. That is why it is imperative that an AEOS scheme be announced immediately for those areas. They are under restrictions that force costs on them. Under the new scheme, as was mentioned by Senator Comiskey, some of the higher payments will be reduced gradually, but under Pillar 2, there should be a much higher payment in the designated areas. Areas are designated as less favoured, more severely handicapped and hill areas, and the gap between them is not adequate. There should be a substantially wider gap to allow a higher payment for hill farms and designated areas. I know there is not a magic wand to make extra money, so adjustments must be made in other areas to achieve this. I agree about bureaucracy. We need what flexibility we can get.

Deputy Phelan does not live too far away from me and she knows the financial pressure many people are under. Most farmers invest in their business and have a commitment to banks relative to that investment. Any sudden change would have a huge impact on the money they spend in the local village, of Graiguenamanagh for example, and with builders or on the employment created through local marts, meat factories and so on. It is important to support that economy. This is all about jobs and exports.

In reviewing disadvantaged areas, it makes no difference whether a hill is in Graiguenamanagh or Mayo. Hills have the same problems wherever they are. We must retain all the areas currently designated. Huge work was done to have areas designated, and Senator Comiskey was heavily involved in much of that work. There are hilly areas in the Chairman’s own area of south Roscommon where farmers would gladly swap two acres for one. It does not matter where the land is. A hill is a hill and it must retain its designation. That is very important.

To support new entrants we need a top-up for young farmers. Reference was made to the use of the national reserve for a farmer who has increased production in the meantime. The Department’s figures show that the value of production of dairy, beef, sheep and grain by farmers who receive €35,000 in single farm payment, and who will take the biggest hit, is far greater than the amount of single farm payment. There is a huge percentage of production and economic activity in those farms and we do not want to undermine that. However, people who have moved from one side to the other and ceased production should take a reduction in payment. For those who have started or increased production, the national reserve should be able to deal with that.

Senator Pat O’Neill also lives close to me. I agree with him that Commissioner Ciolos’s proposal would lead to a few very large factory farms and would undermine the family farm structure. Many family farms that are dependent on the €20,000 or €25,000 single farm payments would cease production and we would have the New Zealand model of every farmer milking 550 cows. The effect of that on jobs, employment and rural society would be devastating. We have a vital national interest in protecting our family farming model. A small number of farmers have no indebtments. If they have a level of production the national reserve should deal with them. We must do everything that can be done.

The programme for Government promised to reduce bureaucracy but neither the Government nor the Commission has done much about this. It needs to be tackled. We could take out bureaucracy and reduce costs and create employment. Everyone can see that costs are rising. External factors have led to a rise in the cost of fuel, fertiliser and feed, which are the three big agricultural inputs, and this is putting huge pressure on farmers’ costs. The Government must be serious about reducing bureaucracy. Unnecessary bureaucracy and cost must be cut out. Value for money must be sought. We are all in favour of protecting the environment and of good animal welfare. We sell our food around the world based on the highest standards. However, unnecessary levels of bureaucracy that add cost should be removed. The greening proposals, as currently exist, create a huge level of bureaucracy.

Mr. Pat Smyth:  The point was made that farmers must be brought on-side. The national council of the IFA represents farmers from Donegal to Kerry and we have 4,000 voluntary officers throughout the country. We recently held four regional meetings on the upcoming referendum. The members of IFA are united and focused.

With the single farm payment as it currently stands, average farm income is €21,000. Over the last five years, between 75% and 80% of net farm income depended on the single farm payment. The budget is very important. Everything we hear from Europe is concerned with austerity but we need a growth pact. I see no better way of getting growth than a fully funded CAP budget. Indeed, there is a credible case for increasing that budget. If there are cuts in the CAP budget, which I hope there will not be because we need a growth pact, the CAP budget should be fully funded, both for rural development and the single farm payment.

We need objective criteria for assisting young farmers. The proposal is for up to 2%, and less than that will do a good job. A farmer should not receive the payment just because he is young. There should be objective criteria and equity should be brought into the system. We want to ensure that the system is not abused.

The Minister must find solutions to the Irish problem as soon as possible. The Minister will take over as president of the Commission early in 2013. We hope negotiations can be advanced in that period to a point where a decision can be taken. As an independent chairman, he has a job of work to do in building alliances, getting support and putting flexibilities in place as early as possible so that Irish concerns can be dealt with.

The IFA understands the importance of where supports go. Pillar 1 must support active productive farmers. There must be minimum moves over the longest term possible. As the president said, under Pillar 2 and in the context of 50-50 funding with the EU, better targeting will, while maintaining the budget, deal with many concerns, particularly in hills, restricted areas, vulnerable sectors and among vulnerable farmers.

The bureaucracy of greening is bad enough, but it cannot be a redistribution mechanism for the single farm payment. As it stands, a farmer who does not comply with greening regulations loses 100% of the single farm payment. If there is a greening percentage, any penalty must be restricted to that.

Equity in the food supply chain must be part and parcel of the solution. The Minister for Jobs, Enterprise and Innovation and the Government must ensure this at national and European levels. Retailer regulation must be driven forward to achieve a solution in the medium to long term.

Deputy Tom Barry:  I welcome our guests. Most of us are singing from the same hymn sheet. I have been involved in farming through the coupled and decoupled systems and I am of the opinion that, in practical terms, a system of flat rate payments is not going to work. I agree with our guests in respect of food security. The flat rate model is not a production model, it is designed to satisfy those in the Commission who want the countries in European Union to operate at the same level. It must be remembered that commodity prices are variable and are heading south. Some people are trying to justify the flat rate model by stating farmers require less support from Europe because commodity prices are increasing. The market is actually quite shaky and in many respects the payments farmers receive from Europe ensure they enjoy some level of stability. I do not believe it would be good to operate what is a bad idea over a long period. It is either a bad idea or it is a good idea. The problem arises from the fact that when time passes, it is necessary to deal with the matter in a hurry once again.

The Commissioner came before the committee and it was obvious he is adamant about greening. He explained the budget would not pass if greening does not proceed. I would have preferred if he could have indicated by how much the budget would decrease if we did not have greening. It would be nice if such information could be provided. All we have been given to date is an arbitrary figure. I do not doubt the Commissioner’s sincerity in respect of this matter but I would still like to know by how much the budget would be reduced if greening were not to proceed.

Land quality in this country is variable. In one parish and even in one field, one can come across great land and poor land. Reference has not been made to an adjusted acre. There must be some criteria in the context of why payments are being made. I agree with the need to support young farmers but I could not agree more with Mr. Smyth in respect of the need for objective criteria. In some instances involving young farmers, properties are being divided up. If a family owns a substantial farm and if there is a view that grants can be obtained for the younger person, then the property is split in a manufactured fashion. This does not reflect a true passing on of the land because the young person involved is not a new entrant in his or her own right. There must be new entrants but the process must be dealt with in a holistic fashion. Farms should not just be split up on the basis of paperwork.

Europe must realise significant disadvantages obtain in this country. In the first instance, Ireland is an island nation. I trade in grain and when this is scarce across Europe, we obtain the remnants of what is transported from the Continent. If there is no grain for sale in a tight market, why would the Europeans send the best grain to Ireland? What happens is we receive the worst of the grain and that is because we are at the end of the line. People must remember we need to protect ourselves in that regard. The fragmentation of farms and the fact they are small are also factors. From a social point of view, there is nothing wrong with how matters are in this country. However, there must be recognition of the fact that in the context of being competitive, the status quo in this country places us at a disadvantage.

Another of the disadvantages which obtains in Ireland is the colossal problem relating to the banks and to obtaining finance. I certainly agree with the IFA’s stance on the upcoming referendum. I recently saw a leasing document given to a farmer in respect of a new tractor. He and his wife were asked to provide personal guarantees. How ridiculous is that? They put up a deposit of 20% of the asking price and in addition to this the bank wanted personal guarantees. We have all witnessed the effects of such guarantees. Land passes from generation to generation. If the banks are of the view that to satisfy their greed they can begin demanding personal guarantees and thereby place the passing of land between the generations at risk, I must inform them this will not be allowed to happen. What is happening at present is a shocking indictment of the banks. The way the single farm payment system is being set up is going to affect overdraft limits. If a bank is not confident a particular individual is going to continue to receive a single farm payment, which is his or her stable income at the existing level, then it will reduce his or her overdraft limit. This is at a time when the price of fertiliser sprays, etc. is increasing.

The position with regard to the renting of land is completely unclear, particularly in light of the future date which applies. Major problems are arising and people are losing land which they normally farmed. In addition, so-called map farming is giving rise to many difficulties. People who have not been involved in farming for years are now technically map farming. There is no point in failing to mention this because it is rife and is driving the cost for genuine farmers of renting conacre lands off the scale. This is causing a reduction in single farm payments and thereby causing major difficulties for people. I encourage the Commission to allow us to stack 25%, instead of 50%, of our land holdings because this would ensure people would not be obliged to buy maps or rent conacre lands at levels at which they are going to lose money.

I am a great supporter of Europe but it is not always correct. Its flawed analysis gave rise to the sugar industry leaving this country. We may have differed in our approach to this matter but I think we can agree the stand Europe took in respect of it was wrong.

My final point relates to administration fines. I am not sure whether our guests have come across these very often. When people have problems with their single farm payments, these sometimes relate to the fact they made genuine mistakes. I accept on other occasions such problems can arise because someone may have done something which he or she should not have done. Administration fines are crippling. When the new CAP proposals are put through, the position in respect of these fines must be considered. If problems occur, it is only then people lose payments for the current year, but the administration fine can be so great it might equal the following year’s payment. This is equivalent to informing someone he or she has lost his or her income for next year. If a public servant was informed he or she was going to lose his or her income for two years, this would be deemed to be completely unacceptable. It is also completely unacceptable in the context of agriculture.

There are many battles to be fought in respect of single farm payments. I am aware there are some relevant matters which must be addressed but there are also other issues in respect of which action must be taken as we proceed.

Mr. John Bryan:  I have made the point a flat rate payment model will not work. It would work if all land quality was the same, all farmers were willing to invest in their businesses and were involved in the same level of activity, and profitability across the various sectors was the same. However, not all land or all farmers are the same. One does not pay all employees the same wages regardless of the different jobs they do. There are different rates for different jobs. The single farm payment was introduced to compensate for the cost of production. The cost of production in the EU is much higher than that which obtains in South America or New Zealand. This is due to animal welfare and environmental measures. If one is not farming, one is not obliged to shoulder the cost. The payment must be linked, therefore, to the level of production. I agree with the Deputy that this is why a flat rate system will not work in Ireland. While it might appear to be perfect on paper, it will undermine production if it comes into operation.

I also agree with the Deputy in respect of map acres. The Department is in possession of a computer system which contains an unbelievable amount of information and it should be in a position to identify those who are not farming. Its inspectors should be visiting those who are submitting map acres rather than farmers who on wet days are trying to separate soiled water from clean water and who in the spring months might spend 20 hours a day calving and lambing. The inspectors should not be visiting such farmers at this time of the year and then ignoring the activities of those who are not farming at all. If the inspectors did their job and consulted the Department’s computer system, they would visit those who are not farming rather than those who are.

I also agree with what the Deputy said in respect of people who try to set up false entities or who split farms to try to establish partnerships or whatever to obtain grant payments. It is unacceptable that a young person starting out in farming in his own right should expect to obtain extra entitlements in respect of land his father had previously been renting for a few years. That is why extremely stringent criteria must be applied and why the Department’s computer system must be used. The Department knows a great deal more about the stock I have had on my farm and about the fertilisers I have used than it does about any human being who lives in this country. It knows every movement of every animal. In addition, it is aware of every birth that takes place and it knows the lineage of animals across numerous generations. The Department possesses a great deal of information and this should be used to pursue those who are not active in farming rather than those who are.

A point was made about us being an island nation and the cost put on us as a result. We are at the end of the supply chain for purchasing fertiliser, fuel and energy. We are also at one end when it comes to delivering food to market. We export over 90% of our produce from Ireland and the cost of transport is rising. In order to transport food from Ireland to Manchester, for example, the cost is significant in comparison with the British or German costs of putting it on a truck. It is a significant disadvantage. As we protected the family farm by not landing bulldozers in Donegal and not stopping them until they reached Cork, most of the hedgerows have been left intact and we need some credit for that as well as an acknowledgement of our island nation status and biodiversity. None of this is borne in mind in the document. The fragmentation of farms is a significant problem but it is better than a system where one person owns an entire parish. This creates problems around herd testing and rounding up cattle, and that extra cost must be borne in mind.

I know from farmers speaking to bank personnel about purchases and investment that the banks would consider the single farm payment. A member spoke about a tractor but if a bank is worried about a single farm payment, it would seek severe guarantees to allow that kind of purchase. The single farm payment is a paycheck and we must consider farm incomes. Farming is a long-term business and as with commodity prices, there may be a couple of good years and a couple of bad years. With regard to farm incomes, 2011 was a high number but 2009 was half of that. It must be borne in mind that farm incomes fluctuate. The gross receipts in Ireland in 2009, including the single farm payment, rural development fund and market support and cohesion, were greater than net farm income, which shows how dependent we are on the single farm payment. The banks are aware of that so should keep in mind the damage any change would do.

The Commission handled the conacre issue by setting a future date, which caused chaos in the market. It was irresponsible and although we are seeking change, much damage has already been done. People have been put off land they have taken. We fought very hard to get stacking back in 2004 and 2005, and I remember one practitioner saying that if we got stacking, conacre would be for nothing. It was not in the real world. There should be a level of flexibility but there should be no payment for those who are claiming to farm but do not farm. That may free up some land. Administrative fines can be unacceptable. I attended the Waterford executive on Tuesday night, and a man told me about an inspection on a farm where the owner had suffered a stroke and could barely talk. The inspector levied fines on a man lying in the bed, which is absolute lunacy. He did not have the decency to find out the state that man was in before going in.

Somewhere along the line there should be a bit of reality and we must encourage the people who are getting up in the morning to work. We must do everything to help the production sector. There was a case in Kilkenny where a man was suffering from depression and asked to put off an inspection but it still went ahead, which is unacceptable behaviour in any strand of life. These people are working hard for their living. We need to achieve reality at EU and Government levels. The Minister should tell his officials to get real. We are struggling to keep an economy running and anybody putting in an effort should not be treated in the way I described.

Chairman:  I thank the witnesses. Over the past 12 months or thereabouts, since the Commissioner published his draft document, we have focused on the real issues. The country is united on all sides with regard to the multi-annual financial framework and Common Agricultural Policy, CAP, budgets. There is unity on most issues, with the possible exception of redistribution. With that issue, the reference years and active farmers in many ways can be sorted together. We must consider some system where if we are to justify CAP based on production, it can only be paid where land is being used productively. There must be an active farmer in its simplest guise.

Where land ceases to be active, after three years of inactivity it should roll out of entitlements, and that funding would go back to the reserve. This would ensure land is being used all the time for production. Measures can be built internally through a taxation code, for example, which would allow that to happen. There can be joint arrangements between young and old farmers, with everybody working together to trigger the payment. We should all consider that. Redistribution should not come about suddenly, especially in light of dairy quotas going, as there would be too much uncertainty and volatility.

At a previous meeting, two MEPs and Mr. O’Driscoll mentioned that the EU auditors have already identified that the current proposals regarding greening will add significantly to bureaucracy and cost, and they are not in favour of it. There will be significant changes to the greening criteria, and the menu of options for a country is probably the best method of achieving the goal of 30% greening. Ms Mairead McGuinness, MEP, made the point that it is a public goods measure, which should be given some value in the same way as carbon credits, which were mentioned by Deputy Colreavy. If a value is placed on it, perhaps it can be traded, and somebody with much marginal land could be in a position to join with somebody with little or no marginal land; it would be a kind of pooling system.

We will summarise these issues and put our own slant on it, although we value the input from the IFA. We should acknowledge, as the MEPs have done, the calibre of our officials within the Department who are operating both in Dublin and Brussels on our behalf. Normally those people do not speak before the committee as they accompany a Minister but the interaction with Mr. O’Driscoll on Tuesday was very informative and opened all our eyes. It provided a level of comfort to know that we have people of that calibre working. It is important for the committee to recognise that officially. I thank the witnesses.

The joint committee adjourned at 11.20 a.m. until 2 p.m. on Tuesday, 8 May 2012.