Thursday, 27 November 1997
Dáil Éireann Debate
Minister of State at the Department of Agriculture and Food (Mr. Davern): I welcome this opportunity to speak on the proposals which were unveiled by the European Commission last July for the reform of the Common Agricultural Policy in the framework of Agenda 2000. These outline Commission proposals, present challenges and opportunities and constitute the most important issue facing Irish and European agriculture.
The proposals are designed to address the implications of enlargement of the Union to include ten Central and East European countries and Cyprus, and analyses and forecasts of world agricultural markets which suggest that surpluses could re-emerge on the Union market, particularly in the light of further possible trade liberalisation resulting from the next round of WTO negotiations.
 In June l993 the Heads of State and Governments of the member states decided the ten central and east European countries could in principle join the Union if they fulfilled the economic and political conditions associated with membership. The Commission has examined the structures in these applicant countries and recommends in Agenda 2000 that Poland, Hungary, the Czech Republic, Slovenia, Estonia and Cyprus can meet the criteria for entry in the medium term. The remaining five applicant countries are unlikely to meet the criteria for some time. The Commission recommends that accession negotiations should begin next year with the six countries which can meet the criteria for entry in the medium term while negotiations with the remaining five countries can commence as soon as they are ready. The European Council will make a decision on the Commission's recommendations when it meets in Luxembourg next month.
With enlargement, the number of consumers will rise by 100 million to around 500 million. Consumers in central and eastern European countries have, on average, only one quarter of the purchasing power of the average EU citizen and average expenditure on food still represents for them a far higher proportion of total household expenditure.
Agriculture plays a much greater role in the economies of these countries. More than 20 per cent of their workforces, on average, are employed in agriculture, compared to an average of 6 per cent in the EU which in recent years has done a great deal to facilitate their integration. Serious problems remain to be tackled, particularly in relation to the structure of primary agriculture and the food processing and marketing sectors. That is why the EU is offering technical assistance and advisory services.
In spite of the structural deficiencies throughout the agriculture and food sectors in these prospective new members of the EU, it is clear they have enormous potential to increase food production. While it is difficult to predict precisely when this will occur, one thing is clear — it will happen. The EU must take account of this fact as it looks at policy adjustments into the next century.
The Agenda 2000 proposals have been considered by the Council of Agriculture Ministers in recent months. At its most recent meeting last week, the Council agreed on conclusions for submission to the European Council which is due to meet in Luxembourg next month. Spain disagreed with that part of the conclusions dealing with the Agricultural Guideline.
Among the conclusions were that the model of European agriculture must be versatile, sustainable and competitive. It must be capable of conserving nature and responding to consumer concerns regarding food quality and safety, environmental protection and the safeguarding of animal welfare. This model of European agriculture  would serve as a reference point for the thrust of the applicant countries' agricultural policies and provide a powerful force for integration in an enlarged Union. The long-term outlook for the main agricultural markets given in Agenda 2000 was an acceptable working hypothesis and, without reform, significant surpluses could emerge. In those circumstances, the reform process which commenced in 1992 should be continued and deepened. The framing of a rural development policy had an important role to play in preserving and creating permanent jobs on and off farms. Agricultural regulations and procedures should be streamlined with more subsidiarity for member states — the arrangements to be established should not distort competition nor lead to renationalisation of the Common Agricultural Policy. It is important to have adequate and suitable resources available to complete the reform process and achieve the desired model of European agriculture and to retain the Agricultural Guideline, as a ceiling, in principle and as presently calculated. The Commission should frame its proposals as quickly as possible on the basis of this agreed approach. The Commission is expected to table detailed proposals in the first quarter of 1998 in light of the outcome of the European Council.
Any estimate of the net effect of the Agenda 2000 proposals on Irish agriculture has to be regarded with extreme caution and is crucially dependent on future market prices which are notoriously difficult to forecast. Even if it is assumed that market prices for the three commodities concerned — beef, milk and arable crops — will fall by the precise amount of the proposed reductions in support prices, difficulties will still be encountered in arriving at a reliable estimate. There is the question of which rate should be used for the conversion of ecu values to Irish pound values; the difference could be as big as 8.5 per cent between the two extreme options available. There is also the simple fact that the Commission's proposals are incomplete and the crucial details which could affect significantly their impact are unknown. For example, we do not know what proposals the Commission will make, in the form of measures, to encourage extensification or environmental preservation and enhancement.
With these qualifications, the net effect of the proposals on prices and premia could be a loss of the order of £125 million a year. This tentative estimate is based on what is known of the proposals on market supports; it does not take account of the effect of changes in Ireland's receipts under the structural heading where the Commission's proposals are less developed.
It is my intention, between now and the emergence of the Commission's detailed proposals and in the subsequent negotiations that will follow at the Council of Ministers, to ensure that not alone will losses not accrue for any sector of Irish agriculture but that the final outcome will be positively advantageous for Irish farmers individually  and provide a platform for the further development of the food industry.
I wish to discuss briefly the main areas of interest to Irish agriculture in Agenda 2000. Before dealing with the main elements I wish to set down a number of principles which will govern my approach in the forthcoming negotiations: first, farmers' incomes and the economies of rural areas will have to be protected — this will require, among other things, full and permanent compensation for price reductions; second, the system of compensation will have to be fair and equitable — the economic interests of member states in the product areas concerned will have to be fully respected and one type of production should not be disadvantaged by reference to another; third, the system of compensation should be defended vigorously in the next round of World Trade Organisation negotiations.
In general terms, the Commission has proposed that the support price of beef should be cut by 30 per cent, that the various beef premiums, including a new beef premium for the dairy herd, should be increased and that intervention should have a reduced role. These proposals follow the route charted by the MacSharry reform proposals in the beef sector and would result in a balanced EU beef market based on increased domestic consumption and greater penetration of non-EU markets without the aid of export refunds.
These proposals are of crucial significance to us given the central importance of beef production to the economy. It accounts for over one third of agricultural output. We export some 90 per cent of annual output, making us the largest net beef exporter in the northern hemisphere. Given our dependence on export markets we are uniquely sensitive to the nature of EU support arrangements. This was clearly demonstrated when the latest and worst BSE crisis broke in March 1996.
While Ireland accepts the need for reform we have a number of serious concerns which have been expressed at the EU Council of Ministers. The litmus test not alone for Ireland but for all member states is whether the Commission's proposals, if implemented, will restore balance to the market and sustain producers' incomes.
The proposals are designed to increase beef consumption in the EU by reducing prices, while at the same time enabling beef to be exported to third countries, the South East Asian market in particular, without subsidies, thereby avoiding WTO constraints on subsidised exports. Beef consumption in the EU should increase if the price is substantially reduced but it is difficult to predict by how much. It is also debatable whether the EU can achieve the level of export market penetration envisaged with the level of price cuts proposed. Much will depend on the price structures and production potential of the EU's major competitors. Given the uncertainty, the future EU beef regime must retain an adequate safety net. Reliance on aids to private storage, as envisaged by the Commission, would not be adequate  in difficult market circumstances and where major market imbalance remains a threat.
Another key element for consideration, in relation to the future direction of the beef regime, is the maintenance of a reasonable income for European beef producers. I will be seeking to ensure they are compensated for any cut in price. The final agreed package must ensure that extensive grass-based systems are not disadvantaged as against the more intensive bull producing systems in the EU. The proposed increases in premiums, as they stand, are biased in favour of intensive beef production. It would be a mistake to maintain that bias in the final package. Extensive methods of beef production which are environmentally friendly must be encouraged now more than ever. I note that the Commission will reflect on how incentives to production can be improved. I await its detailed proposals with interest. In addition to seeking enhanced arrangements for extensive production, we shall be seeking appropriate measures to safeguard heifer beef production which would be endangered by a 30 per cent price reduction.
Under the reform proposals, while premiums will play an increasing role in beef producers' incomes, I am concerned that the level of efficiency at farm level remains relatively low in comparison with other sectors. Teagasc has shown there is major scope for improving incomes through the efficient utilisation of grass and the use of high quality silage leading to enhanced animal performance and reductions in the cost of beef production. In a trading environment where prices will continue to remain under pressure it is incumbent on producers to improve their level of efficiency.
The outline framework for reform of the dairy sector in Agenda 2000 is: an extension of the quota system until the year 2006; an improved flexibility and simplification of the common organisation of the market; a gradual decrease in support prices by an average 10 per cent over the period and the introduction of a yearly direct payment of 145 ecu for dairy cows, adjusted to average yield, in addition to a payment of 70 ecu per cow in respect of the dairy herd's contribution to beef production.
The Commission claims that its proposals represent a cautious approach and that such an approach is justified because expected market developments do not require extreme measures. However, the Commission clearly indicates that, in its view, the present system, with its intrinsic rigidities, cannot last forever.
Despite the rigidities associated with strict supply control, the quota regime has largely benefited the dairy sector since 1984. In general, the operation of the quota has maintained high income levels among dairy farmers. Of equal importance to Ireland is the role that the milk quota system plays in maintaining viable farming activity in less advantaged rural areas through instruments like restructuring and the temporary leasing scheme as well as ring fencing quota in  these areas. In general, the quota system has been a successful tool of economic development in rural areas. For these reasons, I agree with the Commission's analysis that there is no immediate need to make changes to the quota regime. If change is required, it would be preferable to signal it well in advance to allow the EU dairy sector and individual producers to adapt and assist longer-term planning. Commission analysis suggests that the world market for certain dairy products is expanding. I broadly share this view and believe this will continue to be the case in ensuing years. It is commercially and economically important that the European Union maintains a strong presence in that growing market. Any retreat from this position over time would seriously undermine the long-term viability of the European Union dairy sector. Any changes to the current system designed to enable the European Union to enhance its presence on world markets should not result in a worsening of the income of dairy farmers. Therefore, an overriding principle is that any price reductions, or other changes having an adverse effect on price, should be accompanied by an appropriate direct aid system. While this principle is explicitly accepted in the outline proposals, detailed clarification is still required on the actual level of, and mechanisms for, compensation likely to be paid across member states.
In relation to the arable crops sector, the key element of the Commission proposals is a reduction of 20 per cent in the intervention price with only half of this being compensated for by way of an increase in area aid payments. The new rate of aid would be 66 ecu per tonne applicable to all crops including oilseeds, linseed and protein crops and also to “set-aside”. It is also proposed that these payments would be reduced if market prices remain at a higher level than currently foreseen. A top-up of 6.5 ecu per tonne is proposed for protein crops. Aid for silage maize and other silage cereals would no longer be payable. The standard rate for “set-aside” would be set at zero instead of the present 17.5 per cent. Voluntary “set-aside” would be allowed and the “set-aside” areas would receive the non-crop specific payment rate of 66 ecu per tonne. Penalty “set-aside” would be abolished.
While the predicted growth in world demand and price trends would facilitate the disposal of increasing quantities of cereals without export subsidies on the world market, one cannot escape the conclusion that there is indeed a clear risk of a return to substantial levels of intervention stocks with resultant strains on the EU budget and its capacity to fund adequate levels of support for farmers in all sectors. However, if the Commission's response is to be accepted, price  reductions must be fully compensated so that growers' incomes are not reduced.
Mainstream agriculture will remain crucial to the economic and social fabric of rural areas for the foreseeable future and, therefore, market policies will remain of the utmost importance. However, other measures are required to enable farmers and rural dwellers to enhance their incomes and thus enable them to remain in rural areas. Therefore, given past trends in numbers employed in agriculture, the proposals for an increased emphasis on rural development in Agenda 2000 are necessary and welcome.
I also support the idea of integrating environmental goals into the CAP and the best way forward in this regard is the strengthening and extension of existing measures aimed at maintaining and enhancing the quality of the environment in general. Budgetary resources will need to be made available for targeted agri-environmental measures and for the maintenance and promotion of low input systems as it is unrealistic to expect farmers to produce quality food in an environmentally friendly manner while ignoring the cost factors and effort involved.
The CAP has already been subject to extensive reform which is set to continue. It is in the interests of Ireland and other member states that European agriculture should become more competitive on world markets and developed on a sound, stable and sustainable basis. However, it must also be done in a way which ensures that the principles of the CAP — the cornerstone of the European Union — are preserved, that the interests of member states are taken into account in a balanced way and, above all, that the incomes of farmers and the viability of rural communities are fully protected. While the general direction of the reform has been put forward by the Commission in Agenda 2000, I stress that a huge amount of work at all levels of the decision making process will take place before final decisions can be taken. That is why I am initiating a process of consultation so that Ireland's input to the negotiations can be based on the widest, best expertise available and on the views of those who have a direct stake in the outcome of these negotiations.
We are in the process of setting up four consultative groups, one each for beef, milk, cereals and rural development, on which we shall invite farmers, processors and others with a direct interest, in addition to academics, to serve. These groups will remain in existence for the duration of the negotiations. I expect an expert input from them so that the strongest possible case can be advanced in defence of Irish interests.
I am glad the House is being given an opportunity to debate these very important proposals. I look forward to a constructive debate and assure Members that, as I prepare for the next phase of negotiations, I shall be happy to take on board any suggestions they may put forward which would be of assistance in advancing the interests of Irish agriculture and of rural areas generally.
Mr. Coveney: While I am happy to see the Minister of State open this debate, why is a speech in the name of the Minister for Agriculture and Food not being delivered by him? Will he come into the House during this debate?
Mr. Coveney: Without implying anything about what the Minister of State may have said, or will say, I should point out that this debate had been signalled for over a month, that we did not fix the date and considered it important that the Minister for Agriculture and Food be present. However, the Minister of State has explained that is not possible.
I will deal later with the position in regard to Agenda 2000 but, as stated by our spokesman on Finance, I want to refer to the Estimates for 1998. The climate in which the 1998 Estimates were prepared was one of the most favourable any Government could find itself in. Due to fancy financial engineering it is difficult to work out some of the figures but, as pointed out by Deputy Noonan yesterday, in real terms current spending will increase in 1998 by £900 million pre-budget. One could argue that figure but that is the approximate position. How can the Minister for Agriculture and Food justify reducing the Estimate for Agriculture in this climate? It defies understanding by me and by farming interests. I am sure the Minister of State, Deputy Davern, has been made aware of that by representatives of the IFA, the ICMSA and others who have spoken to us in strident terms in recent weeks.
To put this matter into perspective, if the 1997 outturn, including last week's Supplementary Estimate, was simply increased by 2 per cent for inflation, the figure would have been £757 million for 1998. The reality is that the figure is reduced to £735 million which is a decline of £22 million at a time when every other sector is doing relatively well — some are doing exceptionally well — and when more money is being pumped into other Departments.
This Government came into office on a high note for agriculture. Its leader and the current Minister for Agriculture and Food stomped the country for a year before the general election persuading farmers that the then Government was doing a bad job and that it would do a much better job for agriculture. The first test of that promise is the provision of money for 1998 but the Minister has miserably failed that test. This set of Estimates is an indictment of the Minister, the Taoiseach and the Government.
The position is much worse, however, when one examines where the cuts are taking place. There has been a cutback of £34 million in the headage scheme. On farm investment including  the control of farmyard pollution and the dairy hygiene schemes, which are essential for farmers, there has been a cut of £30 million. Installation aid and other structural improvement schemes have been cut by £5 million. The farm diversification scheme has been cut by £1 million. That is a total of £70 million in cuts under those four headings. It will be impossible to contemplate the position in 1998 if those cuts are not restored. That is the reason I am so disappointed the Minister is not here today because it would be fairer to direct these comments at him rather than at the Minister of State, Deputy Davern.
Further cuts are being made in the TB and brucellosis eradication schemes at a time when brucellosis is in danger of overwhelming our brucellosis free status in the European Union. I hope that will not happen but it is a possibility and a cutback in that area seems particularly inappropriate. There is a rather sinister cutback of £7 million under the heading of administration. We tend to applaud Governments which cut back administration but if one examines this in greater detail, it becomes obvious that the cutback is in the IT area. I suspect that is a cutback in the computerisation of the beef herd which is so essential for the quality improvement scheme introduced last year. The provision for that scheme is very small and that too is a retrograde step.
Mr. Coveney: The Santer proposals and the Estimates are distinctly linked because the proposals pose a future threat to farmers. I ask the Minister of State to relate to his master in the Department that next week will be the last opportunity to put back into agriculture urgently needed money not included in the Estimates. It must be put back particularly into areas to which his party and his partners in Government committed themselves unequivocally prior to the last election. I refer specifically to headage payments, the control of farmyard pollution scheme, the dairy hygiene scheme and installation aid for young farmers. Those four items were committed to in writing in replies given by Fianna Fáil and the Progressive Democrats to IFA questionnaires sent to all parties prior to the last election. The answers are unequivocal. The Government has  reneged on those commitments in the Estimates and elsewhere.
I ask the Minister of State to relay this message to his master in the Department and to the Minister for Finance and request that moneys be restored in next week's budget for headage payments as well as the control of farmyard pollution and the dairy hygiene schemes. Only existing applicants for those two schemes are currently being funded, and no further applicants will be accepted from 1998.
Installation aid for young farmers has been referred to by our party and others. An unequivocal undertaking was given in writing to Macra na Feirme before the election but that was shamelessly reneged on by the Minister last August. In examining the budgetary figures for agriculture next week, it is necessary to acknowledge the critical state of the brucellosis scheme to ensure there is no shortage of funds to maintain our status.
The farming organisations, particularly the IFA and the ICMSA, have made a strong case for a substantial number of issues to be included in the budget. These include the maintenance of lower tax rates, wider tax bands, improved personal allowances, capital allowances, farm machinery allowances and a possible countryside renewal scheme similar to the seaside resorts and urban renewal schemes which have been so successful and which rural areas have been deprived of for so long. They also want issues relating to pensions, stock relief, etc. to be included. Those are a range of reasonable measures, some of which would not cost much. At a time when the Estimates for Agriculture have been ruthlessly cut back and the Minister for Finance is awash with money in relative terms, farmers in particular are entitled to a reasonable slice of the growing national cake under the headings I mentioned.
The agricultural sector faces other difficulties not related to budgetary matters but linked in the longer term to what is happening in regard to Agenda 2000. Last week in his Supplementary Estimate the Minister included a figure of £24.5 million under the heading of agri-monetary compensation. That was the figure for which I understood the Minister's predecessor, Deputy Yates, had got Government approval subject to its approval in Brussels. Under that heading of £24.5 million the Minister includes the words “and weather damage measures” which presumably relate to grain farmers. He appears to be robbing Peter to pay Paul. That figure was put forward by a previous Minister to compensate farmers for EU currency revaluation. Of the £24.5 million, £17 million was intended for the beef sector and the other £7.5 million was intended to be divided between the milk, grain and beet sectors. The Minister seems to be saying that part of that money will be used for the special compensation for grain farmers, but I do not understand what that means. That money was intended for a different purpose to compensate producers for  the consequences of losses arising from EU currency revaluation. The Minister does not appear to have added anything for compensation to grain farmers who suffered severe harvest losses, particularly in the south and south-east.
He has rigidly maintained the position that only farmers who failed to harvest their crops in any shape or form will be considered for any form of compensation. However, a large number of farmers who literally broke their necks trying to harvest practically unharvestable crops will be treated differently from those who could not harvest their crops. That treatment is inequitable. I want the Minister to reconsider this matter to ensure equity in regard to compensation for grain farmers, to spell out the amount of that compensation and when it will be paid. Many grain farmers have difficulties meeting their repayments to their banks. While the banks are alleged to be sympathetic, in the end they must be paid and the farmers need that compensation.
What is happening to live cattle exports to the middle east? The Minister and his leader put down markers in the earlier part of this year that when their party came to power they would be on the plane to Cairo, Libya and the capital cities in the Middle East and beyond. The Taoiseach has not had any input to that or, if he has, he has done so very quietly and nobody seems to know about it. The Minister made one abortive trip to Cairo, but nothing is happening. In response to a direct question by the IFA the Minister and his colleagues in Fianna Fáil and the Progressive Democrats stated unequivocally that they were committed to the restoration and maintenance of the live cattle trade and the competitive position in which that would put Irish farmers.
Mr. Coveney: I am not aware of any results from that endeavour or promise. There are issues relating to payments entitlements in regard to area aid which are inflaming farmers because of delays arising from technical difficulties in the Department of Agriculture and Food and its contractors. In recent weeks Deputy Connaughton and I proposed that, as a means to overcome the cashflow difficulties that presents to farmers, payments should be based on 1996 entitlements which could be adjusted next year when the balance of payments would normally be due, but we have not got a response. The position is not satisfactory. Many payments have been made, but some remains outstanding and those farmers are suffering.
I referred in the Estimates debate to the cut-backs in administration which relate to the computerised cattle movement monitoring system without which talk of beef quality assurance schemes is balderdash. We need and should have such a system and I want the Minister of State to indicate when it will be set up. Strong representations have been made in this House on behalf of mountain sheep farmers who are suffering serious  cutbacks in their incomes as a result of the operation of the ewe premium. The Government should assist those farmers by tackling the anomaly that exists in that regard. Small abattoirs are being forced to implement onerous new regulations at a high cost which they cannot afford. I would like the Minister to consider that area in the immediate future.
One of the most critical matters facing the Government and the agricultural sector at this time is how we will enter EMU and whether we will enter it at the current rate, some other rate or critically at the central rate which would be very much to the benefit of agriculture and our economy in general. The Minister should be at the table with his Cabinet colleagues to ensure that priorities which may suggest other rates of entry should not be allowed to overshadow the fact that it is vital for Irish agriculture and our economy in general that we enter EMU at the central EMS rate which would substantially benefit Irish agriculture and increase our competitiveness, not only in agriculture but across other sectors of the economy. The Government will need to be vigilant about that.
On Agenda 2000, I recognise we are in the early stages of the development of the Santer proposals, but I am concerned by many of the comments I heard about its consequences, the long-term ones in particular, for Irish agriculture. I know the Minister and the Government will do their best for the industry, but that might not be enough. I am not an expert in this matter, not yet anyway, but I have read what was said by some independent sources inside and outside this country. I accept what the Minister said that it is difficult to be precise about figures and that various factors can change matters. Martin Varley, an economist with ICOS, stated on 24 October that based on conservative figures and after the proposed reductions in prices are made and the compensation is paid there would be a net loss in production in milk of £10.6 million per annum, in beef of £86.4 million and in cereals of £8.83 million. In other words, there would be a total net loss of £106 million after compensation based on the current proposals. In addition, if Ireland was to lose its objective one status for headage and installation aid — there is a large question mark over this area — the figure would increase by perhaps another £38 million to approximately £145 million net loss after compensation to farmers. He is an independent economist and that was his opinion.
He also said that direct payments are estimated to increase from approximately 40 per cent of net farm income to approximately 60 per cent. He continued that these developments imply that farm income would be heavily dependent on EU budget sources and it would be extremely exposed to EU and GATT changes, possibly involving renationalisation of the CAP and the removal of the green box status. As the House is aware, this status means that in the GATT negotiations direct payments to farmers as compensation  are not in violation of the agreement. However, that protection is only available to 2003. After then, direct compensation to farmers will be under attack in the World Trade Organisation and the negotiating positions of Australia, New Zealand, America, Canada, etc. The suggestion that the compensation, regardless of whether it equals the loss, is permanent misrepresents the position and misleads farmers. That is a serious difficulty with this entire matter.
Mr. Martin Varley continued that the proposals would significantly reduce the market reward for the production of quality food. If the direct payments were to become decoupled from production in the next WTO agreement, it would exacerbate the reduction in the incentive to produce the current volume of output. This would be a serious disincentive for young people going into agriculture. That was his view but an even worse view was put forward at the seminar by a senior representative of the British Department of Agriculture and Food, Mr. John Slater. He said that supports should be adjusted progressively so that EU producers could compete in world markets, reliance on intervention should be reduced and set aside and quotas abolished.
The British position is that complementary measures should be introduced to ease the immediate impact on farmers' incomes but any adjustment aid should be temporary. Mr. Slater went on to state that there are some indications that the Commission views these measures as an interim step over the longer term. If that is not a code word for temporary rather than permanent compensation, I do not know what is. I fear for Irish agriculture if that is the case, as it appears it will be.
Mr. Slater also stated that it is difficult to envisage permanent payments being acceptable politically in Europe. After adjustment periods, those remaining in full-time farming should be able to compete more effectively in a freer market. However, there will not be many of them. Although that view is not universally accepted, and will not be accepted by Ireland, it indicates how Britain, which is a large player in the EU, considers the position in the future.
Mr. Con Lucey, the distinguished IFA economist, prepared a paper last September. Although he stressed that it was his view rather that of the IFA, he is a significant voice in agriculture. He said that if he was looking for a slogan to describe the most important influence on EU agricultural policy in 25 years, it would be that the GATT changed everything. He stated that levels of import protection, export refunds and permissible direct payments are increasingly determined in Geneva, not in Brussels. He continued that a high level of dependence on direct payments increases the political vulnerability of the CAP. For example, market supports through import tariffs are generally not viewed as subsidies whereas direct payments are viewed as such. They will be subject to political pressures for their reduction in the years ahead.
 I recently attended an ICOS conference on this subject. The most interesting speaker by far was the agricultural attaché from the German Embassy in London, Mr. Richard Peters. The Germans, who are paying the piper, have a different view of what is happening. In relation to Agenda 2000 proposals, which he criticised, Mr. Peters said:
Agenda 2000 advocates drastic cuts at a time when world markets, particularly for cereals and dairy products, are generally viewed to be encouraging. Secondly, it abandons the principle that price cuts should be matched by full compensation to farmers.
German farmers' incomes would be considerably affected and, in a worse case scenario, would fall by 15 to 20 per cent. Furthermore, farmers and their families would in future rely predominantly on direct income support which could make CAP after the year 2000 very vulnerable to political interference.
The German Government's underlying concern is the impact the proposals if accepted might have on farmers, especially in terms of morale. These reforms would trigger the biggest change ever in modern history of income support for farmers who in future would be rewarded for their work predominantly by social welfare and no longer by the marketplace. As we see it, what is needed is above all a thorough assessment of the impact the envisaged reforms will have on European agriculture.
Farmers expect answers to the following questions: do we need a substantial and rapid price reduction? What are the implications for the Internal Market? Why are farmers not entitled to full compensation? What can be done to ensure that direct income payments are not eroded in future world trade negotiations?
What Europe first and foremost needs is to define a negotiating position which meets the requirements of European farmers according to their structure and the environment in which they operate. In our view this position has to be based on the indispensable elements of community preference, internal price support, supply management accompanied by full compensation of farmers in case of price reductions.
On 19 November the Council of Ministers produced a paper which has been referred to the Heads of Government meeting in December. If ever I read bureaucratic gobbledygook that was it. The Spaniards refused to accept it while the other 14 member states, including Ireland, agreed to it. I read it carefully but it does not mention anywhere that compensation will equal the cutback  in prices, despite the fact the Minister said this morning and the Taoiseach said at the recent ICOS conference that our position was that compensation must equal price cuts.
I fear for the future of the Agenda 2000 proposals because of the varying views which exist. They represent a serious threat to farmers and I regret to say that the Government has not yet grasped the importance of this nettle. It is falling into the trap of stating that it accepts the principle and fighting round the edges about compensation. However, the principle is at stake. The Germans are not happy with it and they are paying the piper. We should be cautious about accepting the principle. I welcome the Minister's confirmation that advisory groups from within the industry will be set up and I hope that will help him. However, I fear we are going down this road too quickly and that we are depending on compensation equal to price cuts. That compensation will be under continual assault in the World Trade Organisation discussions in the future and inevitably it will be eroded for the reasons outlined by the commentators I mentioned. We must be extremely vigilant.
Mr. Penrose: I welcome the opportunity to speak on behalf of the Labour Party on the proposals unveiled by the European Commission last July for the reform of the Common Agricultural Policy within the framework of Agenda 2000. I thank the Minister of State for bringing this important matter before the House as it is timely and opportune for us to initiate debate on the matter. However, this is only the beginning and there is a long way to go.
I will try to be as positive as I can in regard to matters which are important in the national interest and for the continuation of family farms. In 1992 the CAP was reformed by then Commissioner, Ray MacSharry, the purposes of which were to maintain the maximum number of farm families; to have a supply of food at an affordable price for the Community; to deal with surplus production in grain, beef and milk products; to take care of the environment and to ensure a supply of good quality food.
CAP reform has failed to deliver in its efforts to maintain the maximum number of farm families as evidenced by the rate at which people are leaving the agriculture industry in Ireland and I will return to that later. It has also failed to provide food at affordable prices for consumers as evidenced by the continuing decline in beef consumption. At that time the Commission also set out a number of other objectives — to increase competitiveness internally and externally to ensure that EU producers would take full advantage of positive world market developments; to  aim for food safety and quality which are fundamental obligations to consumers; to ensure a fair standard of living for the agricultural community and contributing to the stability of farm incomes; the integration of environmental goals in the CAP; the creation of alternative jobs and income opportunities for farmers and their families and the simplification of EU farm legislation. Any individual who has examined the latter would say that goal has not been achieved but it is an area in which the Minister of State is interested.
There has been some success dealing with the surplus in various products but very little overall when it is looked at in a global context, particularly when it is considered that the EU expects 1.5 million tonnes of beef to be in intervention by 2005. In terms of the environment, progress has been made with the REPS and I am glad the Minister of State is confident of getting a ten year extension. That is a good day's work and I applaud and compliment him on it. There are a number of areas that should be refined in it and hopefully he will continue to do so. The agriculture industry was never more aware of quality and consumers than it is now and that is a welcome development.
I will deal in more depth with the issue of maintaining the maximum number of farm families as there is clear evidence that CAP reform has failed miserably in this regard and stands severely indicted. Five thousand farmers leave the industry annually in Ireland and not only are they leaving, but young people are less interested in taking up farming as a career as highlighted by the fact that agricultural colleges are not able to fill all available training places this year. That is a worrying development, which has nothing to do with politics, and one which I am sure has exercised the minds of the Minister and his officials. I went through the agricultural college system and found the year I spent in it to be of substantial benefit.
I urge farmers to avail of such training because it will prepare them for a very technical business and one where they must have financial acumen. It is a fundamental requirement because the least one needs is a certificate or diploma in agriculture. It is also important and a prerequisite for qualifying for installation aid — hopefully it will return — and for the REPS and completing other application forms referred to so often in the House.
This area needs to be examined in terms of the simplification of the forms, a quick reactive response to human errors which are made and an improvement in the appeals system which is still too slow. Recently I raised the issue of an appeal by one of my constituents and it still has not been dealt with. I have not brought it to the attention of the Minister of State but I will before the end of the week. The system gets clogged up but I will not pontificate about that because I have been dealing with bureaucratic systems since my youth. Nevertheless, steps must be taken to ensure it does not take eight or nine weeks to clear up a  genuine human error, for example, on a premium for 16 or 17 cattle. This area needs to be tightened up.
Agriculture is not seen as a career choice any longer and some farmers in my area say it is a career of last resort for them. That is disappointing for farmers who have been entrenched in the industry all their lives, fighting to build up their holdings for their sons. I was an agricultural consultant in the mid 1980s and, while times may have been tougher then, there was difficulty in getting young farmers to take up the reins.
The farm retirement scheme has played a positive role but the enlargement clause in it must be examined. I acknowledge the Minister will be bringing it to the attention of the Commission when it is up for review in 1999 but he should make a strong case because it is time to eliminate it. Likewise the taxation of inter family transfers of leases under the farm retirement scheme is an anomaly which should be challenged. If I was a barrister I would advise a case to be taken. I am not threatening the Minister of State, it is an objective, independent view which I hold.
Mr. Penrose: I am not unfortunately, I have too much business. However, it should be challenged. I am reminded of a farmer who retired at the end of a hard struggle building his farm up to 60 acres. He had a son-in-law who was interested in dairying but he was treated completely differently from a taxation viewpoint in regard to leasing income. I went through the worries that exist in the Department of Finance on this issue with the Minister for Finance and I intend tabling an amendment on Committee Stage of the Finance Bill. It is an unjust impediment which should be removed while there is an opportunity to do so.
There is low morale among farmers, particularly younger ones, who see colleagues from school earning plenty of money looking after the Celtic tiger. I meet parents regularly in their late 40s or early 50s who have worked extremely hard all their lives. They are now faced with a situation where no member of their family has any interest in taking over the farm. Many of the farms have been worked by the same families for several generations. This is more serious in dry stock farming where the average family farm income is £5,000 annually and without direct income support administered by the Department the situation on those farms would be very serious. We should never forget there are 100,000 dry stock farmers and much of this type of farming takes place in the midlands where I am from.
Mr. Penrose: We were credited with being beef to the heels and producing Joe Dolan and while I have no doubt he is a great singer and a worthy ambassador, farmers in that area are not wealthy. In my area we finish cattle from the west. The withdrawal of farmers from that would have a dramatic impact on people in the west.
What will happen to farms if no family member takes them over? More important, what will happen to the families who have been farming there for generations? Only one thing can happen and that is that the farm will be bought up by someone else so that we will end up with fewer but larger farms. Family members who originally lived on the farms will move into the already overcrowded big towns and cities to seek employment. This will have long-term devastating effects on the balance of population in Ireland and on the whole socio-economic structure of rural and urban Ireland. Often those farms are bought up by people from another jurisdiction who engage in what I call remote control farming. Under EU laws relating to the free movement of goods and cattle, that is permissible, but it is demoralising for local people who want to buy land and who are outbid by outsiders who can pay an inflated price. Another worrying development is that Coillte can outbid small farmers for tracts of land. It is the reason I have called for a land agency to replace the old Land Commission. As things are many people cannot get into farming. That is the scene in farming today, so let no one try to tell me that CAP reform is working as it was intended to.
The most damning aspect of this decline in farming is that it is taking place against an annual injection into Irish agriculture of £1.6 billion from the EU. We are getting £1.6 million which the Minister is administering and yet 5,000 people a year are leaving farming, agricultural colleges cannot fill their places, and two thirds of farmers are on a farming income of £5,000 a year. That is the background against which we must discuss the Santer proposals in Agenda 2000. I welcome the Minister's commitment given to me in reply to a question to set up advisory groups from within the industry and even outside to examine the impact of the Santer proposals. Because of our position as an insular country affected by many factors that do not impact on other nations, and because of the enlargement of the EU which is imminent, we have to take careful stock of those proposals. They are nothing short of the greatest scandal that has ever taken place in Irish agriculture. If the Santer proposals in Agenda 2000 go through, there will be devastation in farming here within five to ten years, and the knock-on effects will be felt throughout our economy because of the huge increase in the numbers of people who will be looking for off-farm employment. These will include not only the sons and daughters of farmers but also the families of the  thousands of people in the ancillary industries that depend on agriculture for their business. The Celtic tiger will need to have a very large litter of cubs if jobs are to be found for all of those people.
Despite the obvious failure of CAP reform to maintain the maximum number of family farms over the past five years, the situation is not yet beyond repair for those families remaining in farming, and we in this House have a duty to do everything we can to rescue the situation. Some people think farmers are rolling in money and should not be supported. That is a simplistic view. Farmers have a fixed asset with a poor return on capital that is not readily disposable. Do these people realise farmers are involved in providing an essential service to the community, the most essential service of all, as important and essential as electricity, health and transport? This is not generally recognised. In addition, the product they produce is perishable, which leaves them totally vulnerable. A farmer cannot withhold produce from the market without facing definite and immediate financial ruin. For example, if a manufacturer of paper finds the price of his product is depressed because of oversupply, he can withhold supply or stop making the product. Likewise, if workers in an industry are unhappy with something, they have the option of withdrawing their labour as a last resort. Because they are producers of a perishable product, farmers do not have these options open to them. When their product is ready for the market it must be sold to the highest bidder, whether or not it is profitable to do so. There is therefore an onus on society to take account of these issue, that farmers are providing the most essential service to the community and that they are producing a perishable product and do not have the option of withholding their product or going on strike. Some Deputies might not like to hear me say that farmers should be supported because they think farmers are well off; a small percentage of farmers are well off. In my profession it is the same. The top 10 per cent are doing very well, but at the bottom many people are struggling. The vast majority of farmers who are extremely dedicated to their work and do the best they can are not well off and have anything but a bright future.
There is still hope, and the hope is that the Taoiseach, the Minister for Agriculture and Food and his officials will reject the Santer proposals in their present form. However, it worries me that I have seen no evidence to date that that will happen in a forthright fashion. I agree we have to accept change, and it is how we address that change that is critical, but as far as I can see, the Minister and the Taoiseach appear to accept what the President of the Commission has proposed. Do the Minister and the Taoiseach accept or reject the broad principles of the Santer proposals? Are there any proposals for dealing with the impact they will have? The House needs to know the answer to this, and farmers need to know the answer. If the answer is “yes” the  Government will be rightly credited with giving agriculture, farm families and rural Ireland a lethal injection. I anticipate that will not happen and the Minister, with the support of everyone in the House, will formulate a policy to deal with these matters.
I referred last night to installation aid, particularly for young farmers. It is critical to reintroduce that. About 5,650 young farmers have availed of the scheme but, just when people had a legitimate expectation that it would continue, it was suspended. The Minister has a case to answer. There seems to be no funding for it from the EU, so the national Exchequer will have to come to the rescue. The suspension of that scheme was devastating for young farmers. I have not received more representations on any point than on this. It will cost £5 million to £6 million per annum. That represents 0.75 per cent of the £700 million extra tax revenue we grossed this year.
There were 18,000 participants on the control of farmyard pollution scheme. The extra £20 million will allow it to be maintained at the current rate but will not be able to cater for new entrants. That is critical in the context of the rural environmental protection scheme. We cannot have one without the other, and the Minister should try to secure the necessary funding, and ensure that the budget next Wednesday will bring good news on both fronts.
Mr. Ferris: I welcome the opportunity to contribute to this important debate on the Santer Agenda 2000 proposals and thank our main spokesperson on Agriculture, Deputy Penrose, for allowing me to say a few words about this area of greatest economic input. Without viable agriculture there is no future for this country because we are basically an agricultural country. In recent years there has been a tendency to forget the crucial significance of agriculture to our economy and to rural Ireland. The agricultural industry has been hit by a series of crises in recent years, for example, the beef tribunal — there is still a trail of bad meat going back to that period — the BSE issue, which unfortunately deteriorated again this year, and the inclement weather, particularly in the south east, which destroyed many crops. These crises have distracted the public's attention from the very important discussions on the future of agriculture and rural development, which are part of the Santer proposals.
The proposals emanate from the agricultural strategy paper submitted to the Madrid Council. They seek to continue the process initiated by the then Agricultural Commissioner, Ray MacSharry, during the Uruguay Round. In summary, that process involves the substitution of price support with income support to tackle over-production within the Union and to increase the demand for products within the Union and internationally. Some people regard the forces which drive change in agriculture as inevitable. The World  Trade Organisation talks about the Union's capacity to support exports to third countries.
The requirements of consumers of agricultural products are changing rapidly. For example, consumers now demand increasing standards of quality and specialised methods of production. While these changes present Ireland with huge opportunities, they also require change. The farming organisations are extremely worried about these changes. They do not know what proposals the Government will put forward at the Council of Ministers and cannot analyse them. Their experts and analysts have come across figures which have frightened many farmers.
There is a growing concern about the environment among farmers and the public generally. I am disappointed at the lack of involvement by the Government in the control of farm pollution scheme. It is essential that inspectors have the necessary facilities to inspect works so that payment can be made to enable farmers implement very important changes which will prevent pollution. These developments have prompted considerable changes in agricultural practices. At times farmers are blamed incorrectly, even by officials, for causing pollution. Many people in the Department are quick to criticise farmers who cause pollution but very slow to give them assistance to rectify the problem.
The number of farmers in this category is considerable. Like County Westmeath, my constituency is regarded as very wealthy. There are many small hill farmers in my constituency on the side of Sliabh na mBan and the Galtee Mountains from Glencushabine to Cahir on one side and to Brackbawn and Skeheenarinky on the other. All these people depend on sheep farming.
I wish to refer to a reply given by the Minister for Agriculture and Food to a parliamentary question which dominated the minds of some people in the media this morning. He said that the highest amount paid to an applicant in respect of instalments of the l996 ewe premium was £49,648.70 and that this involved 2,546 ewes. That payment included £14,000 paid under the rural world premium scheme. The difficulty with giving such figures is that people believe all farmers receive payments of this magnitude. As the Minister stated in his reply, this was an exceptional case and the average amount paid in respect of all instalments of the l996 ewe premium was £1,871. This is equivalent to approximately £40 per week, £27 a week less than what one would receive on social welfare.
When my party whip referred to the figures given by the Minister he was accused of saying that hill sheep farmers received similar payments. He wants to ensure that there is a cap on very large payments so that the money can be spread  more evenly among all farmers. We all want to sustain smaller farmers in agriculture.
One of the reasons the Commission believes reform of the CAP is inevitable is the pending enlargement of the Union. The Minister also referred to this point. In the previous Dáil I was chairman of the Joint Committee on European Affairs and at meetings countries involved in the enlargement process confirmed they would make no demand on the resources of the Union for their agricultural industries because there was such a disparity between them. It will be many years before all of them qualify for payments under the Common Agricultural Policy. These countries depend on agriculture and if they immediately qualified for payment it would put an enormous strain on the Common Agricultural Policy. We must not lose any of the benefits we have won for our farmers at difficult negotiations merely because of enlargement of the EU. This is a simple case of the more affluent EU countries refusing to support the newcomers. The payment of CAP supports at current levels would create enormous inequalities in terms of income for Eastern European countries in particular and undermine political stability.
While I welcome this debate on the Santer proposals, which spell out in some detail the broad ideas on CAP reform, the crucial debates will take place in the Agricultural Commissioner's office, at the Commission, with Commissioner Fischler and at the Council of Ministers. It will take several months to analyse these detailed proposals. Yesterday in the Seanad the Minister of State, Deputy O'Keeffe, said that the Santer proposals represented opportunities and challenges for us. He may be right but we will depend to a large extent on the Government's ability to lobby its friends in the Commission. There is little evidence that the Government's negotiators have won any new friends in the Union. One of the reasons for this was the decision by us to agree to the abolition of installation aid for young farmers. I am surprised the Minister of State, Deputy Davern, and others allowed this to happen. The sooner this aid is reintroduced for young farmers the better.
Mr. Ferris: I would like more time to debate this matter with the Minister, Deputy Davern. These matters were debated in our constituency where the Minister was extremely critical of Deputy Spring and me for not doing certain things, but this Government has done very little since coming to office. Farmers are walking out of meetings because of the inactivity of the Government on payments, the farmers' charter  and so on. Those are matters for which Fianna Fáil always fought but now that it is in office it has done nothing about them.
Mr. B. Smith: I welcome the opportunity to make a short contribution to this very important debate. I am glad the Government facilitated this House with the debate because during the course of the last Government the only time we debated agriculture issues was when the Fianna Fáil Party took the initiative and put down motions during Private Members' time. A much wider debate is needed among the public on Agenda 2000.
The Santer proposals are not only significant for farmers, they are of the utmost importance to the whole economy. We are fortunate Deputy Joe Walsh is Minister for Agriculture and Food. During his previous term in that Department he achieved many successes for the agriculture industry, both in his work at home and as a member of the Council of Agriculture Ministers of the European Union. The Minister of State, Deputy Davern, has always been a champion of rural development and agriculture. I am sure both Ministers will be vigorous negotiators on behalf of Irish agriculture at the Council of European Ministers. Successful negotiation of the Agenda 2000 proposals is needed to ensure agriculture and food remain the cornerstone of the economy in the future. Farming, agriculture in general and the associated food industry has the potential to contribute to economic growth, which is essential if we are to have a dynamic rural society. Strong leadership and effective negotiation is needed at ministerial level and I am confident the Ministers will have the determination and capacity to achieve those objectives. This country must be to the forefront in advocating policy changes that suit the agriculture industry rather than accept policy handed down by policymakers in Brussels. At times such policy has been anathema to the interests of Irish farming.
 Agenda 2000 is a far-reaching document which has serious implications for this country. It is basically a set of proposals mapping out a strategy for the European Union for the period up to the year 2006. The framework and strategy includes consideration of, among other things, enlargement of the European Union, future financing of the Union and preparation of policies to bring the European Union into the next century. The review of the Structural and Cohesion Funds for the period after 1999 and the review of the Common Agricultural Policy, which will be impacted upon by the impending World Trade Organisation round, are of crucial concern to us.
With the advent of the common currency, the euro, implementation of the Amsterdam Treaty and enlargement of the Union, with 11 countries from central and Eastern Europe seeking membership, change will be the order of the day. The Agenda 2000 programme is an ambitious plan which outlines the process to expand membership of the European Union to 21 members early in the new millennium. Publication of the European Commission proposals, which are general in nature, must be welcomed so that a comprehensive debate can begin on the future direction of European Union Structural Fund programmes, Common Agricultural Policy, the European budget and European enlargement.
In reviewing the Common Agricultural Policy the European Union must bear in mind that the agriculture and food industry are vitally important sectors of the Irish economy, which are directly responsible for a large proportion of the country's total employment and export earnings. Agriculture remains the key element in underpinning the economic and social fabric of our rural areas and most of our medium to small-sized towns. The well-being of the agriculture sector is strongly influenced by the European Union's Common Agricultural Policy. The influence of the Common Agricultural Policy is not, however, confined to Ireland's farming or rural community. The huge transfer of resources to this country under the Common Agricultural Policy, amounting to more than £1,500 million in 1997, continues to be a major factor in generating strong economic growth and increased employment levels, which have been a feature of our economy in recent years. That funding comprises compensatory payments and funding for the further development of the agriculture and food industry. It must be remembered that those funds are of crucial importance to rural and urban Ireland.
It is vitally important that those interested in the future of agriculture and economic development participate actively in this debate so that the advances made during the 1992 reform process are safeguarded and further changes in the organisation of the CAP are in line with the needs of agriculture and the wider economy.
The Commission's document contains a series of ideas for the future development of agriculture policy, many of which are controversial and some  of which, if implemented, would have far-reaching consequences for farming. The Commission's document marks the starting point of a long process of debate, discussion and negotiation which will culminate in a Common Agricultural Policy geared to meet the challenges posed by an enlarged European Union of up to 30 member states. The emerging Common Agricultural Policy is an issue of vital national interest for Ireland. Debate and discussion must be provoked between all interested parties and I hope clearly defined and broadly similar objectives will be achieved for the future of the Irish and European agricultural sectors. I welcome the announcement by the Minister of State, Deputy Davern, in regard to a wide-ranging consultative process.
Enlargement of the European Union will not be possible without reform of the CAP. While it can be argued that the agricultural sector needs to become more competitive and must change to take account of varying circumstances such as European Union enlargement and world trade conditions, it is vitally important to adequately compensate farmers for price reductions. Agriculture is of crucial importance to those countries seeking membership of the Union, with more than 20 per cent of their workforce on average employed in agriculture compared with an average of 6 per cent in the European Union at present.
The final proposals on the beef sector must ensure, in achieving market balance, the income of producers is protected. I am concerned about the apparent bias in the Commission proposals which favours intensive beef producing systems, which is in marked contrast to our traditional and much superior grassland-based production system. There are indications that the dairy market will expand and the European Union must make every effort to increase its market share. The Commission proposal on direct payments to farmers must be an essential element of any new overall agreement. Farmers must have guarantees of direct income support at adequate levels over the medium to long-term if they are to be in a position to plan for the future. We must put in place a stable long-term support system for our family farms and avoid possible re-nationalisation of the CAP. To ensure the continued viability and expansion of Irish farming, the milk quota system, which has benefited the dairy sector since 1984, must be retained. Direct income supports for family farms must be expanded, particularly where producer incomes may decrease. Attempts to reduce the CAP's share of the European budget must be resolved and the proposals to renationalise the CAP must be defeated. Since our accession to the EU we have consistently opposed efforts to renationalise the CAP on the basis that such a development would be in the interests of farmers from the larger and more affluent economies only.
The milk quota system is crucial to less advantaged areas and mechanisms must be strengthened to retain quota in those areas. The dairy sector  is of particular importance to my constituency and obviously it would be difficult to obtain an increased national milk quota. Efforts must be made to distribute additional quota to small and medium sized producers to bring those farmers' incomes up to a viable level. The question of young farmers and new entrants to the milk sector must also be addressed. Many young farmers take over relatively underdeveloped holdings with limited development options. Adequate provision must be made in the negotiations to ensure access to quotas and production rights by qualified new entrants.
Women have played a key role in agriculture which, to a large extent, has not been recognised. This is an opportune time to outline proposals to support women in agriculture. I hope it will be possible for the Minister to involve women in the consultative process he announced this morning.
I am pleased the Minister laid down the principles that will govern his negotiation, namely, the protection of farmers' incomes and the economy of rural areas and a fair and equitable compensation system, which should be defended vigorously in the next round of WTO negotiations. Rural renewal and regeneration is essential for the future operation of the Common Agricultural Policy. In my constituency, particularly in west Cavan, rural development is not assisted by increasing levels of afforestation. Far too often farmers, particularly young farmers, have been denied the right to expand their holdings by forestry companies buying land that adjoin their holdings. In many cases purchases by forestry companies — often international companies — have denied those farmers the only hope of making their small or medium size holdings viable. An effective land policy is essential if we are not to have blanket afforestation and depopulation in many rural areas.
Will the Minister urgently consider lifting the suspension on the control of farmyard pollution scheme? That scheme is of particular importance to my constituency where the drumlin soil is not free draining, agriculture is intensive and farmers want to put in place proper on-farm facilities to prevent pollution. The farmers I represent have small to medium sized holdings and cannot afford the huge expenditure involved unless they get grant assistance. The reintroduction of that scheme is crucial.
Ms Coughlan: Tá sé an-tábhachtach go mbeadh díospóireacht againn inniu agus roimh na ndíospóireachtaí ar Agenda 2000. Tá an méid atá le rá ag na Teachtaí Dála anseo tábhachtach do na feirmeoirí beaga. Níl tionscal níos tábhachtaí ná cúrsaí talmhaíochta i mo Dháilcheantar féin.
Given much of the media coverage in recent days, it is essential that we adopt a sensible approach to these proposals. It is important that the agricultural sector is not vilified on the airwaves, as the intensity of the argument tends to be misdirected.
 I represent a constituency where agriculture is very important. That sector has benefited — perhaps even more than the fishing industry — from the European Union. I appeal to the Minister to look after small farmers, for many of whom headage and compensatory payments are the only lifeline. While I accept there are some large farmers in the Finn Valley, the majority of farmers I represent are hill and suckler cow farmers, most of whom work part-time because they have no other choice. It is vital that compensatory and headage payments are paid to them first.
We in the Border counties will seek Objective I status. Many people are seeking additional funding and delineation for the type of area in which they farm. We must copperfasten the status of such areas, particularly in the Border regions.
Farm incomes must be guaranteed under the Santer proposals. It is proposed to introduce compensatory payments for the beef industry, with a proposed reduction from 84p to 60p in beef prices. Many consumers at local and European level would be pleased with such a reduction but, as producers, farmers will want compensation for that loss of income. I hope future proposals will be to pay full compensation for any decrease in incomes.
While I am not a great proponent of intervention, it has been an escape valve for many producers and I hope it is not abolished in any future proposals. If intervention were not available when crises arose in the industry, farmers would have faced serious difficulties. We know to our detriment that some third country markets have not been as successful as we would like. We must expand our markets to other third countries, particularly to the Far East which would be a massive market for Europeans. However, that market may not be sustainable in five or ten years' time or we may not be able to compete with other countries, in particular, New Zealand. We must increase our market share, but there must also be a safety valve, such as intervention, for times of crisis . To abolish intervention would be a detrimental step for beef producers. I speak in particular for those producers because there are practically no cereal growers and very few milk producers in Donegal. The small producers should benefit from any proposals made.
I note from the Minister's speech that intensive farmers may benefit most from the Santer proposals. I am not particularly enamoured with intensive farming but it will develop in the community. What we have been able to promote, however, is good Irish beef, a grass-based product which should be supported. Whatever is decided, smaller grass-based producers should be supported over and above whatever is given to intensive farmers.
We must protect farm incomes and provide full and permanent compensation for any loss. That compensation must be fair and equitable and if it must be targeted, so be it. Perhaps we should examine the overall agriculture budget as regards targeting premia to the small producer. We must  support efforts to increase beef consumption in the EU and worldwide. I welcome the discussions announced by the Minister and when they take place I hope everyone is involved, including the consumer, the producer and all organisations. Resulting from that the Government should have a full, well-researched proposal for stable farm incomes.
Mr. Connaughton: I wish to divide my time with Deputy Dukes and Deputy Creed. I am also dissatisfied that the Minister for Agriculture and Food is not present. This debate had been flagged for up to four weeks and if the Dáil is to be relevant to what happens in the country, all the players should contribute. I accept what the Minister of State has said but many people observing the debate will wonder where the Minister is.
Mr. Connaughton: The Minister for Agriculture and Food should be here. The media should be present also. One problem facing farming organisations and politicians is that it is difficult to put across anything said about agriculture in this House. A debate as important as this should be better covered.
It is not so much that agriculture is at a crossroads but in a cul de sac, where we have few options. We have one chance of gaining major influence in Europe and we can only hope that Europe can influence the world thereafter. That is a big story and we may have to return to it on another day. I am worried about statements emanating from the Department of Agriculture and Food. What was said on “Today with Pat Kenny” yesterday was amazing and I have to assume that the views expressed on that programme were those of the Minister. If they were, many farmers will be extremely disappointed.
Before the last general election, the IFA — which is represented in the Visitors' Gallery — the ICMSA and other bodies asked us for our views on the shipment of live cattle. It was the express view of all parties, certainly of Fine Gael and Fianna Fáil, that everything would be done to maintain live exports, not least to maintain competition with the factories. It is my understanding that at a meeting of a Kildare farm organisation last week——
Mr. Connaughton: ——the Minister for Agriculture and Food was asked about the position on live exports. I am told he said progress was slow, which is a reasonable remark. However, he also said that as far as he was concerned we might be better off without the Egyptian trade because the return to the Irish producer was only 17 pence  per pound and it might be better to process the meat in Ireland. If that is the case it is a serious matter for every farmer. I will not be shouted down but if I am wrong I will accept it because I was not at the meeting. I put it on the record and let the Minister say whether it happened.
Mr. Connaughton: There are seven or eight points we must watch in the Santer proposals. Farmers not only in Ireland but across Europe should be worried. Many people who are not farmers and do not even like them but live in their communities should take great interest in these proposals because they will affect their cash registers. There should be a concerted effort across rural Ireland, involving trade unions, commercial life and farming interests, to help the Government get across to our partners that there is a certain level below which we will not go.
We live in a global village and farmers in Carlow, Limerick and Cork have little enough influence on matters which affect them, whether here, in Brussels, or in the GATT negotiations on world trade. We need to exercise the type of influence we are not showing at present to ensure our vital national interest is protected.
Our 150,000 farmers can be divided into three broad categories. About 50,000 are small farmers who find it difficult to make a living and would not survive but for off-farm income; this is the group I know best. Another 50,000 farmers are almost viable and the events of the last two to three years, under various Governments, have created many problems for them. The final group is the 50,000 commercial farmers and despite my background it is this group I worry most about if the Santer proposals are implemented. If I can receive 86 pence per pound for my cattle at a factory today and if I have to sell them eventually for 62 pence, I must accept that I will incur a debt, forgetting about the compensation. I am proud to be a farmer but that has a demoralising impact on me. Like thousands of other farmers, I want to operate at a profit. If prices drop for livestock farmers, cereal growers and dairy farmers — perhaps to a lesser degree for them — our farming community will be demoralised. Commercial farmers are our powerhouses who compete with people all over the world. If their hands are tied, given that farming exports are perhaps ten times more important to us than to other countries, our vital national interests are under threat. This is why all our guns must be blazing.
I have seen many agreements and rows in Brussels and at home. It is the easiest thing in the world to promise compensation but where will it come from and at what level will it be set? It may be set at 86 to 90 pence per pound but as farmers  we argue it should be set at £1 per pound. More importantly, as speakers on both sides asked, will it be the lowest common denominator? In other words, it could be a very low level of compensation. Do we take it that German taxpayers will continue to foot the bill at a time when seven or eight countries, which are much poorer than us, are entering the system? That is the big question. We should put down a marker that we need a safety net.
Has an impact study been conducted of how much extra meat we would sell at home or abroad as a result of the 62p rate? What difference would it make? Even if the rate were 62p in the pound, how much would Irish consumers have to pay? From past experience, it will be much more than 62p.
Mr. Dukes: The Government's position in this important debate does not encourage me. In fact, it is in the weakest possible position. In the five months since the Government came into office, the Minister for Agriculture and Food, Deputy Walsh, has welshed on ten commitments in the two parties' programme for Government. When it comes to breaking faith with the electorate, the Minister for Agriculture and Food is an even bigger offender than the Minister for Justice, Equality and Law Reform. We seem to have a Government which treats even its own commitments with zero tolerance.
I will list the broken promises. They concern the level of headage payments, the young farmer installation scheme, the control of farmyard pollution scheme, the dairy hygiene scheme, prioritising the resumption of live cattle exports, changes in the management of export refunds, extensification premia for sheep, increasing the rural world premium, the establishment of a grower acreage register and amendments to EPA licensing provisions for pig production. Those are the——
For example, the total allocation for headage payments in 1998 is £31.4 million below the 1997 level, a reduction of over 26 per cent. That is nothing less than butchery of the incomes of thousands of the lowest income families in the country. This is the first Government in my memory which has launched such a deliberate and callous attack on rural Ireland and the living standards of rural communities. It is doing nothing to increase public comprehension of what is involved.
He pretended not to know that this income is taxable and that the sheep are sold from time to time. He seemed to think they spend their days like the Ride of the Valkyries, forever wandering around in substantial clouds in the mountains. It was outrageous for a Member to indulge in such pretence on the public airwaves.
At a time when structural change in farming is so rapid and when the pressures for further change are building up, the axing of the young farmer installation grant scheme is incomprehensible and indefensible. I now hear mutterings from Government Deputies that the scheme is being reviewed. It certainly needs to be reviewed but not in this way. In my experience, no young farmer who acted outside the terms of the scheme has benefited from it. However, it is also my experience that many young farmers who qualified for the scheme have been excluded. In at least one case, a young farmer was excluded from that scheme and a person in an appropriate relationship to him was excluded from the farm retirement scheme, despite their having meticulously consulted the appropriate authorities and followed their advice. Any honest review of this scheme would rectify these glaring omissions rather than simply axing it, as now appears to be the case.
The two parties in Government committed themselves to reopening the control of farmyard pollution scheme and the dairy hygiene schemes. As matters stand, the existing provision for those two schemes is sufficient only to meet the commitments made to applicants who have been accepted. It allows no room to reopen the schemes. There has been controversy about these schemes in the past, mainly because the level of uptake was greater than expected. That level of uptake reflects how seriously the farming community has taken to heart today's justifiable concerns about human health and the health of our environment.
I cannot imagine the Minister for Agriculture and Food did not have some understanding of that when he entered that commitment. It is even possible the Progressive Democrats understood it. However, the two parties solemnly wrote into their programme for Government an undertaking which they clearly had no intention of honouring. Even for Fianna Fáil, that is a rare refinement of cynicism. For the Progressive Democrats, who hold themselves out as a policy driven party, it is another illustration of the fact that all that drives them these days is a slavish and subservient sycophancy to their manipulative masters in Fianna Fáil.
Mr. Creed: I thank Deputies Dukes and Connaughton for allowing me to express some of my concerns. The Santer proposals for the reform of the Common Agricultural Policy are not only of interest to those employed directly in agriculture but also to many people employed in rural areas in agri-related industries. The proposals represent a real crossroads for agriculture.
Deputy Penrose referred to 5,000 farmers leaving the land every year. One of the cornerstones of the reform of the CAP must be to ensure that as many people as possible are allowed to earn an income from farming. Any analysis of those who have left agriculture in recent years will show that most of those who are forced to leave are small dairy producers. The reform of the CAP offers significant opportunities to improve the lot of small dairy quota holders.
Prior to the last election, the Minister, Deputy Walsh, made a commitment to increase the production base of Irish agriculture. Surely that commitment could entail using the Santer proposals to secure additional milk quotas for small scale dairy producers.
I regard the Santer proposals as an interim step because the quota regime will possibly be dismantled early in the next century. It is opportune to begin that phased dismantling now by securing additional quotas and distributing them to where they are needed most. None of the instruments used by the State to date to reallocate milk quota, such as tribunals, clawback, flexi milk or temporary leasing, has put small scale milk producers into a situation where their livelihoods are not threatened by the quota regime.
Given that quotas will probably be discontinued early in the next century, we must be aware that we have had our hands tied behind our backs. While our production has been restricted, our competitors on the world markets have unlimited production, particularly countries such as New Zealand and Australia. The phased dismantling of the quota regime, which is part of the Santer proposals, must be used to secure additional production rights for small scale milk producers.
I accept there is a downside in that it may lead to price reductions for producers. However, we must focus our attempts to secure additional quota rights for small scale milk producers. The Santer proposals are the appropriate opportunity to do that.
Deputy Dukes outlined a number of broken promises by the Government, all of which are significant in terms of the commitments given to agriculture. However, they will pale into insignificance in the context of the prospects and livelihoods of many thousands who are currently  employed in agriculture if the Minister's efforts on the Santer proposals to secure the livelihoods of those employed in agriculture, especially small scale dairy producers, are not successful.
Mr. Power: Farmer bashing appears to be the main priority in the discussions on national radio over the past couple of mornings. I was angry to hear a Deputy from the same county as myself display such ignorance about agriculture on “The Pat Kenny Show”. Farmers work within a system of rules laid down by the EU. They are productive by nature but they are restricted to working within quotas which have been in operation for a number of years. Deputy Penrose should brief Deputy Stagg on how the system works. The 40 and 50 year old sheep which one sees travelling through Connemara or the Wicklow mountains are the ones to which Deputy Stagg referred this morning.
The Agenda 2000 proposals presented to the President of the EU Commission on 16 July are only outline proposals. We must wait until January for the details. However, even the outline proposals have far reaching implications for Irish agriculture, the rural economy as a whole and national expenditure.
This issue will affect the lives of us all during the period 2000-6. It behoves us to be vigilant regarding the progress of negotiations at EU level and to have well thought out strategies which will offset the impact of price cuts on beef, milk and cereals on the rural economy.
The Santer proposals contain four interrelated measures: first, proposals to the member states on the financing of the EU budget for the period 2000-6, including the financing of enlargement to the east; second, the EU strategy for enlargement, including the opening of negotiations early next year with five countries of central and eastern Europe — the Czech Republic, Hungary, Poland, Slovenia, Estonia and Cyprus; third, proposals for further reform of the CAP in the period 2000-2, taking account of the enlargement agenda as well as the next world trade board and market constraints; and fourth, proposals on the EU Structural Funds in the period 2000-6, taking account of enlargement and the state of the EU budget. The proposals recommend that the ceiling on the overall EU budget will continue at its current level, equivalent of 1.27 per cent of EU GDP. While it will grow in line with economic growth in the Union, there is no specific increase to finance the proposed enlargement of the Union. This is important.
That no new resources are proposed for the EU budget to cope with the enlargement of the five eastern European countries and Cyprus is  unrealistic. The experience of East Germany, where massive budgetary resources were required to support development for a population of just 20 million, proves that an EU enlargement to include an additional 63 million people cannot be achieved on the cheap. Without extra EU budgetary resources, the cost of enlargement will be borne by the existing net beneficiaries of EU transfers and the impact of the Santer proposals will be more severe on Ireland than on any other member state.
Enlargement to the east is basically a political and security agenda driven by Germany in particular. It is extremely worrying that the Germans will not countenance any increase in the EU budget to facilitate enlargement and that, along with the Netherlands, they are currently challenging their net contribution to the EU budget.
The proposals to reform the CAP further — CAP Reform II — are made against the background of looming over supply on EU markets. The problem is most acute in the beef sector as a result of a decline in beef consumption resulting from BSE. Commission forecasts in the absence of further CAP reform indicate a substantial build-up in beef and cereal stocks over the next few years, as well as some market problems in the dairy sector. As a result, the EU Commission is proposing to cut beef support prices by 30 per cent, cereal support prices by 20 per cent and dairy support prices by 10 per cent during the period of the reform. Although there are no proposals to cut sheep prices, these will inevitably fall in line with lower beef prices.
Farmers are to be compensated for these cuts by increases in direct payments, but the losses will not be fully compensated for in the beef and cereal sectors. The proposed 20 per cent cut in cereal prices has serious implications for grass-based agriculture. Cheaper cereals would make grain-based livestock and milk production much more competitive than grass-based production, which has always been Ireland's greatest advantage in international markets.
The proposed price cut in beef and milk as well as cereals implies a rapid reduction in export refunds after June 2001. Ireland has a very high dependence on export refunds which means that this kind of adjustment process will be more painful and costly for this country.
Another major worry for Irish farmers is that the Santer proposals in the beef and grain sectors will cut prices to below the cost of production. When prices are lower than production costs, direct payments become more than 100 per cent of the net farm income. In this situation, it would be more profitable for many farmers not to produce anything.
The impact of the outline proposals has been variously estimated as representing a cut of between £100 million and £150 million in farm incomes. The impact could be even greater when we see the small print in the detailed proposals next January. It is certain that the income of all  the grain growers, both winter and spring cereal producers, will be cut without full compensation and that there will only be 70 to 80 per cent compensation for the proposed cut in the beef sector.
We must insist that there should be no price cut without full compensation. The Germans and French have already expressed serious reservations about aspects of the proposals and we should consult these important member states to find areas of common ground. Realistically, I do not see any major progress being made in advance of the German general elections next October, so time is on our side to get the kinds of changes we need.
Mr. Power: The Presidency of the EU will pass to Germany in the first half of 1999 and Finland in the second half. The real negotiations on Agenda 2000 will take place in 1999, with a decision likely in December of that year. This will tie in with the timetabled discussions for the next round of the World Trade Organisation. It should not be forgotten that the price cuts proposed by Santer are, to a large extent, driven by the next World Trade Organisation round.
The failure of Chancellor Kohl's coalition Government to return to power after the German elections would have a huge impact on the future of the CAP. The alternative SDP-Green Government would be likely to reduce support for agriculture, both in Germany and throughout the EU.
The impact of the Santer proposals on the dairy sector is limited compared to beef and cereals but we must wait for the small print next January. It appears as if the quota regime will last at least until 2006. If so, flexibility will be vital to allow young and small dairy farmers to get sufficient amounts of milk quota at lower cost. While the EU Commission has ruled out a B quota for milk, which is regrettable, it is prepared to make the quota system more flexible. This may involve leasing land in certain circumstances, which would be a good thing if it was properly thought out and administered.
The Santer proposals involve significant changes to the future funding arrangements for measures covered by Structural Funds. The proposal to incorporate headage under the guarantee fund could result in reductions in headage if the fund is not enlarged to take the increased costs into account. On the other hand, the inclusion of headage under the guarantee fund could make headage more secure if sufficient funds are provided to meet the increased cost in all member states. The proposal to link headage payments to  areas of high amenity will result in cross-compliance in sensitive areas
Early retirement, forestry, REPS and Leader will continue and there will be closer links between CAP and rural policy. The linking of CAP and rural development could have a negative effect on the CAP budget, as rural development is likely to be in a position to obtain more funds to encourage farmers to secure off-farm employment and the creation of employment opportunities in rural areas.
While Ireland's status in relation to Structural Funds after 1999 is not clear, my understanding is that a new status, Objective 1 and transition, will apply to the country or to some sub-regions yet to be defined and agreed. It can be anticipated that Objective land transition status will mean a lower EU funding rate and a lower percentage EU refund rate which in turn would have implications for the operation of key farm and rural development schemes after 1999.
The Santer document also reveals that the Commission is planning to put a CAP or a ceiling on the amount of direct payments any single farmer can receive. The Commission proposes to give member states some flexibility in deciding rates of direct payments and ceilings on direct payments without commonly agreed rules. While Santer states this does not mean rerationalisation of the Common Agricultural Policy, it is difficult to avoid the conclusion that it will involve some threat to the principle of a common policy in a single market.
The path mapped out by the Commission is moving prices to world market levels and compensation has far reaching consequences for the future of agriculture in Europe. Questions which must be asked about the future policy are: can the compensatory payments for price cuts in Agenda 2000 be paid on a permanent basis? Are we in danger of seeing a rerationalisation of the Common Agricultural Policy with an envelope of money being provided for each sector in each member state?
In the forthcoming negotiations on the proposals, we must be mindful that Ireland will continue to need a corps of strong commercial farmers with the capacity to compete under WTO free trade rules at world prices. We need this to keep as many farm families as possible on the land and to allow the food industry to be in a position to continue to export successfully.
Mr. Collins: Like previous Members I offer my support to the farming community. I pay tribute to the Minister, Deputy Walsh, and the Ministers of State, Deputies Davern and O'Keeffe, for allowing us to put forward our points of view to the Minister and the Minister for Finance in the run-up to the budget next week. I have no doubt he will listen carefully to us. It is important that  agriculture is not only seen to be doing well but is doing well. That cannot be said and farmers will testify to that.
In discussing the Santer proposals we must see what they are and how they will affect us. As the previous Deputy said these are outline proposals which map out a strategy for the EU for the period up to 2006. We understand the Commission wants a broad acceptance of the overall strategy and the principles involved. The strategy has three main strands: enlargement of the EU, future financing of the Union and preparing EU policies for the next century. The Commission say this approach is necessary because of the need to implement the political decision already taken by the European Council to enlarge the EU: to renew the EU's financing arrangements for the period after 1999; to review Structural and Cohesion Funds for the period after 1999 and to further reform the CAP, not least because of the impending WTO round. Given the obvious links between these needs the Commission took the view that it should put them all in one package. In comparison with the Delors I and Delors II packages we have a considerably more complex set of measures to grapple with. If we include the link issues of implementing the Amsterdam Treaty, the advent of the Euro and the need to complete the reform of the EU institutions, it is clear we are moving into a period of tremendous change, which the Commission considers will make for a wider and stronger Europe. One part of that change will come through enlargement, to which Deputy Power referred.
The Commission takes the view that the next financial agreement should cover a seven year period from the year 2000 to 2006, inclusive. As regards the Structural and Cohesion Funds, Agenda 2000 proposes some important principles. Much detail has still to be spelt out, such as a definition of the different objectives and the base year or years for assessing GDP and GNP levels. There will be an overall increase of 75 billion ecus for structural policies from 200 billion ecus to 275 billion ecus. Of this 230 billion ecus will go to the existing 15 states with 45 billion ecus going to pre-accession aid and aid for the new member states.
In regard to the Common Agricultural Policy, the strategy is to build on the MacSharry reforms in key market sectors, to strengthen rural development policy and to take more account of the environmental dimension. Even if enlargement were not on the agenda, there would still be a need for the further stage of reform. Analyses of world agricultural markets has led the Commission to conclude it must avoid creating surpluses which it would be unable to get rid of, to become more competitive on the world market and while doing so to guarantee farmers an adequate income. I emphasise this is important. In this way CAP reform will help to achieve a long-term viable and competitive agricultural sector. The key aims for CAP are: greater competitiveness on the internal market and abroad, a fundamental  commitment to food safety and quality, safeguarding an adequate standard of living for people working in agriculture, incorporating environmental goals into the CAP, creating alternative sources of income and employment in rural areas and simplifying EU agricultural law.
The actual substance of the key proposals, in the main sectors of interest to Ireland, is well known: cuts of 10 per cent, 20 per cent and 30 per cent, respectively, in the milk, cereals and beef sectors; the milk quota system will be retained; the impact of cuts on farm incomes will be compensated for by means of additional or new premiums.
The MacSharry approach has meant balanced markets and considerably lower intervention stocks in most of the sectors concerned. EU spending on agriculture as a whole has stabilised and is within the agricultural guidelines.
Mr. Sheehan: At a time when farm incomes are being reduced, even though almost every other sector is experiencing income growth, it is incomprehensible that spending on agriculture in 1998 is to be reduced by £35 million, a drop of 9 per cent. This is a dismal effort and will do nothing to restore the confidence of the agricultural community. Allowing for the inevitable variations under individual subheads and the transfer of the forestry division to the Department of the Marine, there is no sustainable argument for reducing spending on agriculture at a time of falling incomes and uncertainty. Despite unprecedented buoyancy, the Minister has failed dismally to convince his Cabinet colleagues that many farmers face uniquely difficult conditions. Far from reducing expenditure on agriculture the Government should do the opposite at this critical juncture.
The Minister has failed hopelessly to deliver on his pre-election pledge to farmers and seems to lack clout at the Cabinet table and the European Commission. He should take off the kid gloves and inform his counterparts that agriculture is our primary industry. We are not responsible for the wine lake or the citrus fruit mountain in Europe. We produce clean agricultural products, of which we should be proud. We are the only remaining island nation in the EU since Great Britain was connected to the Continent by the channel tunnel.
I fail to understand why the Minister and his team of experts have not secured preferential treatment for farmers. He must drive home the message that they are labouring under a disadvantage. Headage payments must not be reduced as they are farmers' only source of salvation. No live cattle have been exported to the Middle East since 10 November 1996 when the last shipment left Greenore. The Minister has failed hopelessly  in his efforts to have this market reopened. He does not seem to have the will to fight his case in Europe.
Farmers are receiving 86p per pound for beef. Under the Santer proposals, if implemented, they will receive 62p per pound. They are pawns in a game played by bureaucrats throughout the world. The time has come to engender sanity. The Minister should act before it is too late.
Mr. Boylan: I thank Deputy Sheehan for sharing his time with me and three of my colleagues. That is an indication of the level of interest on this side of the House in the Santer proposals. More time should have been provided for what is an important debate. The consequences of these proposals for agriculture are frightening if implemented in their present form. If we are to succeed in mounting a challenge and changing the thinking behind them we will have to be wholehearted in our efforts.
I am more than concerned at the propaganda emanating from the Department. I regret this as I have a high regard for the Ministers of State, Deputies Davern and O'Keeffe, who have both been successful in farming. Yesterday on the “Pat Kenny Show” the Department's PR person instead of defending the system distorted the facts in relation to the headage payments made to farmers. I do not know his name or if he is one of the officials present in the House but he seemed to suggest that as farmers were in receipt of a bonanza of millions of pounds they should say nothing. Why should they remain silent? The payments are not illegal. They are entitled to receive them and they form part of their income. Farmers would much prefer to receive a fair price for the goods they produce and forget about compensation but this is no longer possible under the MacSharry reform package.
It has been suggested that the price paid to the farmer should be reduced to the world level. This is nonsense as one cannot sell below cost. If one is required to do so one must be compensated. There should be no hidden agenda. The propaganda emanating from the Department to the urban dweller is that farmers are ripping off the system. If this continues we will not be able to mount a proper campaign against the Santer proposals and to defend the right of farmers to earn a livelihood from their holdings.
Companies such as Sisks do not represent the interests of those involved in the building industry. Dunnes Stores and Quinnsworth do not represent the interests of small retailers. Likewise in farming the four to six large players which are in receipt of substantial funding do not represent the interests of the small farmer who receives on average less than £1,500 per year from the EU.
Mr. U. Burke: Agriculture, which is our most important industry, is being downgraded by the Government, mainly through the inactivity of the Minister. His promises made last June and when in Opposition led farmers to anticipate boom, expansion and increased prosperity but the opposite is the case. The Houdini of agriculture is no more, the prophet of boom is silent and the whiz kid of activity has been strangled. He is the wrong man to be in command in this battle. He has demonstrated in the Estimates that he is running ahead of the Santer proposals by cutting supports for farmers ahead of time. Under the Santer proposals farmers stand to lose £150 million. This year under the Minister's proposals farmers in County Galway will lose £3 million. Cuts hurt. The Minister should go back to Cabinet and demand support for the maintenance of family farms. One cannot over-state the impact Agenda 2000 and the next phase of the reform of the Common Agricultural Policy will have on our farmers if the Minister does not take immediate action.
The rural environment protection scheme, intended to assist small farmers to improve various aspects of their farming activities such as the management of the countryside, the control of pollution and so on, has proven to be a huge disappointment in implementation. Departmental officials encouraged their participation and it had a reasonable uptake until red tape and the inability to deliver on its provisions led to the Department being brought to court regularly when applicants challenged its officials' interpretation of various aspects of it. The most recent case was the shared commonage problem, settled out of court, in the case of approximately 60 farmers, mainly in the west, after a long battle and failure on the part of those same Departmental officials to accept that they could be wrong on occasion. This excellent scheme has been badly served by them.
The Minister of State is well aware of one case, that of a Cork farmer who opted for the early retirement scheme, with leased commonage in Bonaboy in north Mayo, a split holding. Will he inform the House of the reasons this case has gone through.
Prior to the last general election the Minister undertook to provide funds for private abattoirs here. There were 900 of them but that has now been reduced to 400. A sum of £20 million is required urgently for their upgrading to acceptable European Union hygiene standards to avoid  their being forced out of existence, as have so many others before them.
I will concentrate my remarks mainly on the debate at European level since Europe will decide the future of our agriculture industry and rural areas. My concern is that the political compilation of this Government means it does not have real political influence at European level. For example, we know that, within the European Parliament and Commission, the solid political power blocs, namely the Christian Democratic movement and the Socialist movement make most of the important decisions, they being the main political players. Although the Minister of State served as an MEP for some time until the electorate of Munster decided otherwise, he will readily appreciate that, unfortunately, since this Government is comprised of parties irrelevant politically at European level it does not matter. My fear is that, because of that political alliance, we do not have sufficient clout at European level. There was a time when our Taoisigh, whether Dr. Garrett FitzGerald or Deputy John Bruton, on touring European capitals, had that political clout, whereas the same does not obtain today.
I appeal to the Minister of State to impress on his senior colleague — who appears to have become ever more removed from the practicalities of life as far as agriculture is concerned — that he should examine the Book of Estimates and the forthcoming budget in addition to the broader aspects of the Santer proposals which I predict will decimate our rural economy and rural areas generally, adding greater numbers to the dole queues.
I hope the forthcoming budget will contain some good news for agriculture since the Book of Estimates presents a very dismal picture. My final plea to the Minister is to endeavour to correct matters as speedily as possible and restore some hope to those engaged in agriculture.
Mr. Enright: The Minister of State said his senior Minister is extremely busy engaging in negotiations on behalf of our farmers, which is why he cannot be present. Since the Minister of State has been a Member of the House for a long period, he will readily appreciate that it is a gross  insult to the House, the electorate and the agricultural industry in general that the Minister is not present for this debate. It is a grave reflection on him, since it is most important that he listen to elected representatives' views.
Our farming industry is going through a very difficult period, facing obstacles on a number of fronts including declining cattle prices, harvesting difficulties occasioned by bad weather, the changes now proposed by Monsieur Jacques Santer, in addition to which the Government, in its approach, is actually attacking the agricultural industry. I put it to the House that because of this, approximately 100 young people, many under the age of 35, leave agriculture weekly.
Mr. Enright: While I know the Minister will say the Government will honour applications already received, the installation aid scheme was indeed a welcome innovation which attracted young farmers into agriculture. Its abolition is regrettable. I call on him to ensure its restoration in the forthcoming budget.
Before the last general election the Minister and his party leader promised to reinstate the control of farmyard pollution scheme. It should be done without further delay. The enormous cut of £35 million in the Agriculture Vote in the Book of Estimates is extremely serious. I emphasise that our farmers are going through a very difficult period in respect of which the Minister is adopting a lethargic approach. It is time he began taking some positive action on behalf of the farming community generally.
Mr. G. Reynolds: I am glad to see the Minister of State here since he is responsible for western development, the part of the country I represent. As he will be well aware, the backbone of our western seaboard is agriculture. If these Santer proposals are accepted and implemented by this Government some ten years hence the vast majority of farmers in my constituency will no longer be engaged in farming. I hope the Minister will allocate funds to the western seaboard.
The Minister for Agriculture and Food, when in Opposition, said he would reinstate the control of farmyard pollution scheme once Fianna Fáil returned to Government. I perceive that as being impossible since some £35 million has been deducted from the Vote for Agriculture this year. I do not know where he will find such moneys. Since he is not here today, I hope he is en route to Egypt in an effort to have our live export trade, so vital to our agricultural industry generally, reopened there.
 I should also like the Minister to confirm to farmers in disadvantaged areas that cuts will not be effected in headage grants after l999. Were such cuts to be effected, farmers would quickly leave the land.
This being a difficult time for the agricultural industry generally, it is in need of strong leadership. I am extremely doubtful about it at present. When Fianna Fáil were in Opposition they gave many promises on which I doubt they will now deliver. Yet that party has an opportunity to show our agricultural community that its views are at the forefront of Government policy. Nonetheless, a massive reduction of 9 per cent in the Vote for Agriculture for l998 does not augur well for demonstrating to the agricultural community that they have a Minister sufficiently strong, not only to represent them in Europe but able to adequately present his departmental requirements at the Cabinet table. The future of agriculture will be in serious jeopardy unless we include proposals that will save small farmers from extinction.
Mr. Healy-Rae: I want to speak about the small hill farmers in severely disadvantaged areas. I realise the Minister of State, Deputy Davern, does not come from one of these areas, but he has a good knowledge of the people I am talking about.
Mr. Healy-Rae: There are 10,000 hill sheep farmers living in the areas to which I refer. In 1995, these people received subsidies of £20.50 under the ewe premium scheme. In 1996, those subsidies were reduced to £13.99 and in 1997 the figure is £11.78.
Mr. Healy-Rae: In all honesty, how much lower can those subsidies go? They appear to have struck rock bottom. They will have to be increased to maintain these people in the hills and mountains of south Kerry and other severely disadvantaged areas.
Let there be no doubt in anybody's mind that these severely disadvantaged areas were not so described simply for a laugh. They were thoroughly examined and it is now well known that if we do not come to the assistance of the people living in these areas, their numbers will dwindle and there will be nothing left but foxes, badgers and other wild animals.
I call on the Minister to come to the assistance of the family butcher by providing the suitable abattoirs required to adhere to EU standards. It does not make much sense for a man to travel from Kenmare to Mallow or Tipperary for a few carcases when he has facilities of his own which merely require to be updated.
Mr. J. Brady: It is difficult to follow in the footsteps of Deputy Healy-Rae, particularly as this is my first time to speak in the House. I welcome this debate and compliment the Minister and the Minister of State for their interest in agriculture. People in agriculture have experienced many difficulties in the past number of years, particularly in regard to the BSE crisis.
I come from a beef producing county where 60 per cent of the farmers own less than 60 acres of land. We are all well aware of the plight of small farmers over the past few years. It is tragic to see so many young people leaving the land because their small acreages cannot provide them with a livelihood. That is the reason it is important that the Santer proposals should be rejected out of hand, and I know our competent Ministers will address that through the negotiations.
Beef farmers have suffered enormously over the past two years. I realise our Ministers are doing their utmost to get the ships sailing again but that is difficult when the factory owners, who are operating a cartel, pay farmers whatever price they like for their product.
Many backbenchers like myself are anxious that the farmyard pollution and dairy hygiene grants be restored. These grants are vitally important because many people cannot participate in the REP scheme if they are unable to get farmyard pollution under control. The installation aid for young farmers is vitally important because every encouragement should be given to them to stay on the land and continue to run their farms when their parents have retired from farming.
I welcome the fact that the Minister is setting up four consultative groups in beef, cereals, dairying and rural development. He will invite farmers, processors and others with a direct interest in these areas, in addition to other people, to serve on them. The groups will remain in existence for the duration of the negotiations and the Minister expects an excellent input from the representatives so that the strongest possible case can be put in defence of Irish interests. The existence of these groups will not displace the normal process of consultation with farming organisations, processors and other interest groups.
 With regard to the stance of the European Union in future world trade negotiations, we should learn from our experience of the last GATT round. We should decide our reforms in advance of the next WTO round and then vigorously defend the European vision of agriculture on which the reforms are based. It is essential that we take the initiative as that is the best way to achieve the objective.
I want to refer to an issue of crucial importance. The funding of reforms and the participation of new member states in the market regime must be secured. The Commission is projecting that both the reforms and enlargement can be accommodated within the agricultural guidelines, but there can be no certainty about this. We must ensure that adequate funding is available before we commit ourselves to proceeding further with these proposals.
Mr. Browne: (Wexford): I welcome this debate on the Santer proposals. I compliment the Minister, Deputy Walsh and the Minister of State, Deputy Davern, on their activities to date in this particular area.
I come from a county where agriculture is of major importance to the local economy and large and small farmers are very concerned about the proposals on the table. While we have been told these are only proposals and there will be a good deal of negotiation between now and their becoming a reality, farmers are suspicious about what the future might hold for them as a consequence of their implementation. They have wide implications not only for farmers but for rural Ireland. They will affect thousands of workers involved in the food sector which is closely related to the agricultural sector. They will affect our major national asset, our agricultural industry. That industry is vital to our economic growth and we are very dependent on it.
It is questionable if bureaucrats and policymakers in the EU have any sense of the importance of agriculture to our people. Many of the proposals related to agriculture put forward by bureaucrats in Brussels on a daily basis are drafted by people who live in an ivory tower and do not understand the importance of the agricultural industry to our people. Many of the proposals and regulations, particularly those related to the food sector, we have had to implement in recent years have suffocated the industry and, in many ways, have caused it to stand still. I urge the Minister to ensure that before any long-term decisions are made on Agenda 2000 proposals a message is sent loud and clear to the bureaucrats in Brussels that our agricultural industry is our most important one. It is important not only to farmers but to other workers in this nation.
We have a two tier farming industry made up of large farmers who have become more well off and small farmers who have been driven out of  business. I note in an article in today's The Examiner that neither of the policies of the two contenders in the forthcoming IFA challenge mentioned the plight of the small farmer. Our farming organisations operate to a very small extent in the interest of small farmers. That also applies to the co-operatives. The board of the Avonmore Waterford Group has sabotaged 700 to 800 jobs as we near Christmas and they have shown little concern for the workers involved and their families. For many years I predicted that PLCs will take over from our farmers and the farming community. The leader of ICOS said last week that there were too many farmers on the boards of PLCs and that some of them should be removed. If farmers were to allow that to happen they would not have much of a future. They must fight and become actively involved to protect their livelihoods and those of others involved in the industry.
There was much shouting from members of the Opposition this morning about installation aid and farm pollution grants, but those schemes were abolished by the previous Minister, Deputy Yates. Money was not provided in the 1997 or 1998 Estimates for installation aid. I ask the Minister to provide for the restoration of that scheme and the farm pollution scheme in next week's budget, and I am confident he will do that. I specifically ask him to ensure that farm pollution grants are made available to small farmers who cannot afford to implement the necessary pollution controls laid down by local authorities and the Environmental Protection Agency. Unless small farmers are eligible for farm pollution grants they will not be in a position to continue farming and that will result in more small farmers seeking social welfare benefits.
The Minister of State referred to the beef industry which was hard hit by BSE in recent years and the abolition of the live cattle trade, another negative measure taken by the former Minister, Deputy Yates. However, the Minister, Deputy Walsh, reopened that trade. Deputies opposite should not shout too loudly about what the former Minister did when he was in Government. He did very little. He worked to a PR agenda in relation to farmers from day one and did very little to back that up.
I ask the Minister to ensure that the beef industry and the dairy sector will be protected under these proposals. The dairy sector is important to our economy, particularly to small farmers. I hope that when extra milk quotas are allocated the ministerial regime in the Department will ensure it is specifically allocated to small farmers. During the previous Minister's term of office a significant number of farmers with milk quotas of 60,000 plus gallons were able to receive an extra milk quota yearly, but that should not be the case. Like many backbenchers I receive representations from small farmers with milk quotas of 15,000, 20,000 or 25,000 gallons who find it difficult to increase their milk quota and as a result  they have been told by Teagasc and others, including their bank managers, that their operations are not viable. I ask the Minister to ensure in any negotiations on the Agenda 2000 proposals or other proposals that he will seek to ensure adequate milk quotas for small dairy farmers. It is important that small family farms are protected for the future and that we will not continue to generate a two tier farming industry where the well off farmers get most of the area aid payments and other EU payments while small farmers are not in a position to avail of them because they do not have the necessary funds to increase their stocks or milk quotas. As an island nation it is important we should tell the bureaucrats that it is difficult and costly to sell our products on European markets and therefore we must be treated differently. The bureaucrats in Brussels appear to want to move a major part of agricultural industry to areas beside major cities like London, Paris, Madrid and the large cities in Germany, which would result in this island nation being left behind. We cannot compete on those grounds. Therefore, it is essential we are treated differently from other countries which may want to change the agricultural proposals.
Members of the Opposition have some cheek to criticise the former Minister, Mr. Ray MacSharry. If it were not for his proposals and his negotiating skills in putting forward the case of Irish farmers, our farmers would be worse off. Under the leadership and stewardship of our Minister, Deputy Walsh, and the Ministers of State, Deputies Davern and O'Keeffe, our farmers can rest assured that when these proposals are being concluded the livelihoods of family farmers will be protected.
Mr. Naughten: I am glad Deputy Browne has confidence in the Minister. I do not share his confidence because nobody could stand over a 20 per cent cut in headage. In addition, up to 50 per cent of farmers still have not received their headage payments.
Mr. Naughten: I will not dwell on the issue because I wish to address a completely separate matter, genetic engineering, which the Minister  had not heard about before this morning. I declare an interest in this area because I am a biotechnologist.
Genetically modified organisms, GMOs, are bacteria, viruses, fungi — which the Minister is not — plants and animals where genetic material has been altered in a way which does not occur naturally by mating or natural recombination. In recent years the development and use of genetic engineering techniques has brought about many useful applications in agriculture, food processing, pharmaceuticals, environmental clean up and other areas. Due to the concerns about the potential risk to human health and the environment, the EU has passed legislation covering the continued use of genetically modified microorganisms and the deliberate release of GMOs.
Almost all analysis has predicted that biotechnology will be the basis of major economic growth. According to the National Science and Technology Council of the USA, biotechnology may play a pivotal role in social and industrial advancement in the next ten to 20 years, as physics and chemistry did in the post-World War II period. The EU growth, competitiveness and employment report makes a similar prediction. These views suggest that biotechnology must play a major part in our economic future. Biotechnology will be a specific agent of technological change in the healthcare industry and the food and agri-business industries where recombinant crops are already widely available and successful in economic blocs other than Europe. Such crops can satisfy public demand for tastier and more nutritious foods and for the reduction of potentially polluting inputs to crop production. It can also satisfy industrial requirements for higher yields and quality plant extracts.
In the environmental sector, an increasing range of effective bio-based technologies are becoming available for the treatment of waste emissions. Among other benefits, these present the real possibility of regenerating current permanently polluted parts of the planet. I do not suggest we should blindly accept genetic engineering with open arms, but it presents major economic and environmental benefits. Therefore, a balanced approach must be taken to ensure that we can compete with the best in the world. Previous Governments did not have a proper economic or general policy on genetic engineering or biotechnology. This also applies to the current Administration and we are losing out as a result.
Europe has created a significant number of new biotech companies and jobs, although the number is considerably lower than in the USA. In crop agriculture, the EU lags dramatically behind the USA in the application of biotechnology. Of the 35 million acres of recombinant crops planted worldwide in 1997, virtually none was in the EU. Similarly, only a few genetically modified foods have received EU wide approval despite their widespread availability in the USA and other markets.
 A further area of concern relates to recombinant vaccines. A significant proportion of vaccine research is now directed at recombinant products. Their availability in the EU will have consequences for human health but also significant economic benefits for animal agriculture. The low availability of genetically modified organism products in the EU is due mainly to the regulatory problems, which in turn are largely due to negative public attitudes. We need high quality, high value, safe products. This is the only way agriculture can compete in future.
The south of the country benefits from high quality products in the cheddar cheese industry. The Minister for Agriculture and Food, Deputy Walsh, is a dairy scientist and aware of the difficulties regarding phage and phage resistance. Many companies spend and lose millions of pounds every day because of problems with phage. This work can be done much more quickly using genetic engineering. However, it cannot be used in Ireland because of the regulations. This means long winded processes must be used to come up with exactly the same product but it takes six months longer.
I ask the Minister to consider this area and initiate a full debate. Everybody in biotechnology research or industry fully subscribes to the need for the regulation of biotechnology, including GMOs. Indeed, in the early 1970s when such technology was developing, genetic engineering researchers voluntarily agreed their own controls. However, there is significant experience of GMOs and a clear picture of their potential for economic, environmental and health benefits. It is time Ireland and the rest of Europe moved from a position of imagining the disadvantages and dangers of GMOs to realising the opportunities and benefits they can provide. However, I am sure Deputy Sargent will disagree with me on this matter.
Mr. Sargent: I welcome the Deputy's call for a debate on that area and I thank him for sharing his time. However, I disagree with his glowing welcome for some aspects of genetic engineering on the basis that they are available in the USA. I hope we will not slavishly follow the actions of the USA because it is not America but the major commercial corporations based there which are the prime motivators behind the growing use of genetically engineered products.
Regarding Deputy Naughten's first point, there is a need to introduce serious controls on labelling of genetically engineered products. We must stress that the cause of farmers is shared by everybody. It should not be viewed as a sectional interest seeking special treatment. People depend on food which is generated by farming on small or large scales, but they are entitled to the respect of knowing what they are consuming. Genetic engineering must get its house in order regarding the marketing of produce. The debate on genetically engineered products has not yet begun in terms of the ramifications of releasing organisms  into the environment which have been tested under controlled conditions. One cannot predict how they will react in the general environment. A debate on this aspect is much needed and long overdue. I welcome the call for such a discussion.
The background to the Santer proposals is the continuing trend, which has not been redressed by any Government, of the exodus from the land. Small farmers are being forced out of agriculture and they are the victims of the trend of the worship of free trade. The view is that free trade is good in itself. In the same way as people think healthy food is good, free trade is considered necessary for good health. In farming free trade could be viewed as the cause of a great deal of problems. Farmers, in addition to the community which depends on the food, must put the alternative view that unfettered free trade will continue to denude Ireland of its farming community and infrastructure.
There are many good aspects in the Santer proposals and we must try to analyse them. We should not throw out the baby with the bath water. There are many environmental and conservation objectives which are required for the long-term good of farming. It must be recognised that a balanced environment will support farming because an environment which is overexploited and ultimately unsustainable would be a dreadful legacy for future generations of farming families.
There will be a reduction in farming unless environmental and conservation objectives are taken into account. However, the free trade element of the Santer proposals will allow greater control by the United States and New Zealand, as a result of which consumers will have less control over the quality of their food.
I have referred previously to the labelling aspect of genetically engineered products. In many ways it is a continuation of CAP reform and has caused a great deal of disruption to Irish farming. The Santer proposals will further widen the link between the primary producer, the farmer, and the consumer and it is time consumers were much more involved in this debate. The move toward more direct payments could depress the product price so far below cost that it could lead to a situation where it will be better for farmers to stay idle full time, which they do not want to do even with the set-aside provision.
It is likely Ireland will lose its Objective status and the Government must put contingency plans in place on a regional basis, but this will be a difficult task based on the experience of the disadvantaged areas scheme. We must be careful about suggestions to lump all payments and funds under one umbrella. As always when EU bureaucrats tamper with agriculture there are anomalies. For example, if the price of beef is projected to fall then competition will force other meat prices down and new premiums will have to increase. Will this be budgeted for on 3 December? We have listened to promises of price reductions for consumers for many years, yet we are aware of  their emptiness. Another example is premium headage payments where the majority of dry stock farmers have only 20 suckler cows.
Subsidies need to be examined. I represent Dublin North, as the Minister of State will know from visiting Teagasc in Kinsealy. There is a healthy mix of opinion extending from the north city area to the farming areas of the Naul, Garristown and Balbriggan. The cry from urban dwellers unconnected with farming to end subsidies needs to be challenged and it is important that farmers are rational about the justification for subsidies in the long-term, not just the short-term. It is much more complex than it seems at first. If subsidies were removed from agriculture then control of food production would pass even more from farmers to the corporate sector.
This is the case in the US where, under the guise of so-called free trade, support for farmers has been slashed and a far more invidious subsidisation of corporate industrial agri-companies has taken its place. The US is attempting to force this system on the rest of the world through GATT and its successor, the World Trade Organisation. Europe is currently being subjected to covert bullying tactics to lift the ban on hormone injected beef and genetically engineered soya beans. This dispute may soon emerge into the open through a legal case under the GATT rules and I hope that will provide a debate where Deputy Naughten and I can lock horns and investigate both sides of the argument.
One of the reasons put forward by the European Commission and the Government for the proposed slaughter of two million calves at ten days old and two million weanlings at ten months old is that the GATT rules dictate that Europe must accept many tonnes of beef imports, for example, 28,000 tonnes from Argentina, while being closed out of many global export markets. Successive Governments and the Commission have signed Ireland up for this. How can they justify such a sell out? Once again, the contradictions of European agricultural policy become apparent.
The socialist centralist aim of producing cheap food regardless of quality and damage to the environment blends cosily with the right wing aim of handing over control of production to the corporate sector. Where does the consumer fit in this and where is the long-term interest of agriculture when it seems that the pressure from big business interests on Governments is so great that they present this as being in support of farming? If the agenda is being set by big business interests, generally non-Irish, it does not support long-term farming.
EU schemes, as currently operated, are a series of stopgap measures designed for damage limitation. Almost all payments are based on the more a farmer has, the more he or she gets. Only large farmers can afford to get involved in supplementary activities while small ones are deprived of the primary function of producing clean, healthy food because under these rules it becomes impossible to sustain a viable income.
 The REPS, which has most potential to help genuine environmentally friendly farmers, has also introduced the concept of ghettoization of nature by facilitating the taking of some land out of intensive production while allowing the remainder to be intensified further. Extensification, fewer animals per acre, has been used in some cases by larger farmers to buy more land per animal and, as with new schemes, the person with large amounts of ready cash can buy into the latest one which is why the sudden closure of all on-farm investment grant schemes is a blow to small farmers in their struggle to compete in terms of quality.
It is important that the Department of Agriculture and Food takes into account the increasing demand for organic produce in Ireland. All supermarket chains say they cannot get supplies of organic produce in Ireland and must import from other countries which, ironically, are far less able and prepared as a result of environmental degradation to grow such products but which have managed to jump on the bandwagon and successfully develop an export market which we should be well capable of developing.
During the recent debate on An Bord Glas, we were left without any hope of development in the organic sector. Different types of produce were discussed but not the method of farming. This area has potential and is badly in need of development. Will it be possible to discuss the matter further? The Department of Agriculture and Food is being looked to for guidance. Organic organisations depend on the voluntary input of many of their members who believe in the cause. However, the cause is very commercial and I cannot understand why the Department has not taken advantage of and built on it. Hopefully, the Minister of State will address this.
Set-aside is a morally bankrupt system and we should argue — farmers will join with us — that it is not the way forward if we are to produce a healthy farming industry and proper community development throughout rural Ireland.
Mr. Killeen: There are two elements of the debate which I particularly welcome. The first is that it is being held in Government time — over a long period most debates on agriculture were held during Private Members' time and it was difficult to deal properly with issues. The second is that this debate is not a response to an immediate crisis which, unfortunately, has been the case in virtually all debates on agriculture over the past three years or so.
It is important to set a debate on agriculture in context and, in this instance, it is in the context of the Santer proposals. It is important to bear in mind the background of the European Union, its commencement as the Common Market after the Second World War, the food shortages in Europe, the political and economic background, the progression to the Common Agricultural Policy and GATT, and the various elements which come into play and which, in many instances, are  substantially outside our control as a nation but which impact greatly on policy.
The second context in which a debate on agriculture needs to be set is that of the individual farmer planning for the future. That applies in particular to young people deciding whether they might be prepared to make a career in agriculture. They have to believe they can make that decision, that the decision to participate in farming in the long-term is one which is open to them. That has effects on the population and social structure of rural areas, on the economy and the social climate generally. It would be foolish and short-sighted to debate agriculture independently of the huge industrial sector which is dependent on the agricultural sector.
In those contexts there is a need for clear planning, which would be difficult unless done along the lines of the European Union's Agenda 2000 proposals which are commonly known as the Santer proposals. In that context young farmers particularly face difficulties because they do not know exactly what supports will be in place for them. Most speakers have urged the Minister to ensure, for example, that the installation aid scheme is restored. I add my voice to that. Also, more and more people are gradually realising that farming is an industry which must be undertaken in the context of the environment and the control of farmyard pollution and dairy hygiene schemes and others that had to be suspended through lack of cash. They should be restored, not just for the sake of the future of the development element of agriculture but for the environmental protection element, which is also very important. In this respect the rural environmental protection scheme is extremely effective. I suspect that it may be the direction in which supports for Irish farming may go in future. Concerns have been expressed by many people about the long-term implications for headage payments. The truth is that the payments were substantially front-loaded, the European Union money which was provided has mostly been used up and it is now a decision for Government whether to provide State money to ensure that those payments can continue. I strongly favour that, and I urge the Minister to take that line.
One of the most likely effects of the Santer proposals will be the enormous potential to increase food production which the prospective new members have. EU technical assistance and advisory services are already being made available to these people. It is important that the advice and support they get does not rush them into huge levels of overproduction and factory farming which, unfortunately, would be the likely outcome if we were to go down the road of providing headage type supports which have the effect of inflating the number of animals and the amount of food coming into the marketplace and which work against the interests of the Community generally, the agricultural policy and the environment. Also, overproduction of food would  create trouble, not just for new entrants but for all members of the European Union.
I welcome the Minister's assessment of the net effect of Agenda 2000. It is frank, objective and honest, it pinpoints the potential problems and does not seem to downplay them in any way. It is a good starting point to consider the effects of the Santer proposals. However, it is important that the new framework be sufficiently versatile to respond quickly and effectively to inevitable crises. Some of these may be predictable and it should be possible at the forward planning stage to make provision for them. Inevitably, there will be crises which nobody could foresee, and it will be vital to be able to respond quickly to these and ensure that individual farmers do not go to the wall because of a slow and cumbersome process of putting support systems in place when such crises arise.
In that regard I welcome the Minister's proposal to set up four consultative groups. It is an excellent move. One will be dealing with the beef sector which has had more than its fair share of problems in recent times. The assessment in relation to milk is that the quota system has been largely successful and effective and there is an apparent commitment to that for the next ten years or so. That will be generally welcomed in our economy. Cereal production, which is not hugely important in my area, serves as an example of the kind of difficulties that can arise, unplanned and unpredictable, as happened this year and which were responded to quickly here in terms of paying compensation to the people involved. One of the groups will be dealing with rural development, an area in which the Minister of State, Deputy Davern, is very much involved. The very close connection between the viability of the individual family farm and the continuing existence of the rural community has to be faced up to and prepared for.
There does not seem to be much mention of sheep farming. In the overall context it may not be a big issue. On the ground it most certainly is, and needs to be considered in the context of the Santer proposals.
Another thing which is difficult to predict, but which will undoubtedly have an enormous short-term effect — which, in terms of these proposals, means in the first year or two — is the position the British Government might take on economic and monetary union. They are joined on the fence by Sweden and Denmark, Denmark being one of our competitors in the British market. That is something we need to be aware of. Also, it is seen that the new British Government is preparing the way for participation in a way that perhaps its predecessors may not have been doing.
Mr. M. Kitt: I thank Deputy Killeen for allowing me some time and I welcome this opportunity to speak on the Santer proposals. We have not had enough such debates, although we had a number in Private Members' time when my party was in Opposition.
I want to take up what Deputy Killeen said about hill sheep farmers. Last week we had a meeting with the IFA during which we had frank discussions on that subject. One thing that emerged at that meeting — and it was referred to this morning on Pat Kenny's radio show by Mr. Musgrave from Connemara — is that hill sheep farmers are not included for extensification payments. The maximum amount which can be paid in sheep headage is £2,000. Deputy Stagg referred to a payment of £49,000 in sheep headage and ewe premium to one farmer but most farmers do not receive such payments. When Mr. Musgrave was asked about this he said he could not get more than £2,000 and that extensification for sheep farmers was an avenue that could be explored.
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