Seanad Éireann - Volume 152 - 26 November, 1997

Agriculture—Santer Proposals: Statements.

Minister of State at the Department of Agriculture and Food (Mr. N. O'Keeffe): I welcome this opportunity to speak to the House 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. I believe that these outline Commission proposals present both challenges and opportunities and that they constitute the most important issue facing Irish and European agriculture at this time.

The Agenda 2000 proposals have been considered by the EU Council of Agriculture Ministers over the past months. At the most recent meeting of the Council last week, it agreed on conclusions for submission to the European Council which will meet in Luxembourg next month. Spain however, disagreed with that part of the conclusions dealing with the agricultural guidelines. Among the conclusions reached were the following: 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 begun in 1992 should be continued and deepened; it is important to have adequate, suitable resources available to complete the reform process and achieve the desired model of European agriculture and to retain the Agricultural Guideline, [953] as a ceiling, both in principle and as at present calculated; the Commission should frame as quickly as possible its formal proposals on the basis of this agreed approach.

The Commission is expected to table detailed proposals in the first quarter of 1998 in the light of the outcome of the European Council.

I would like now to discuss the main areas of interest for Irish agriculture in Agenda 2000. It must be stressed, however, that much of the detail of these broad proposals is as yet unknown and will not be available until early 1998. Their full impact cannot therefore be estimated accurately at this stage.

In general terms it is proposed by the Commission to cut the support price of beef by 30 per cent, to increase the various beef premiums including the introduction of a new beef premium for the dairy herd and to have a reduced role for intervention. These proposals continue along the route charted in the MacSharry reform of the beef sector. The result predicted by the Commission is a balanced EU beef market on the basis of increased domestic consumption of beef and greater penetration of non-EU markets without the aid of export refunds.

Ireland accepts the need for reform but we have a number of serious concerns which I have already expressed at the EU Council of Ministers.

The proposals are designed to increase beef consumption in the EU by reducing beef prices while at the same time enabling EU beef to be exported to third countries, in particular the south east Asian market, without subsidies, thereby avoiding WTO constraints on subsidised exports. Beef consumption within the EU should increase if the price is substantially reduced but it is very difficult to predict by how much. Also, it is debatable whether the EU can achieve the 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. Because of the uncertainty which must exist, I do not think that the future EU beef regime can afford not to retain an adequate safety net. Reliance on aids to private storage, as the Commission envisages, 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 that any cut in price is fully compensated. In addition, any final package which is agreed must ensure that extensive grass based systems are not disadvantaged as against the more intensive bull producing systems in the EU. In addition to seeking enhanced production arrangements for extensive production, I will also be seeking appropriate measures to safeguard heifer beef production which would be endangered by a 30 per cent price reduction.

[954] The outline framework for reform of the dairy sector in Agenda 2000 is as follows: an extension of the quota system until 2006; an improved flexibility and simplification of the common organisation of the market; a gradual decrease in support prices by an average of 10 per cent over the period; the introduction of a yearly direct payment of 145 ECUs for dairy cows, adjusted to average yield, in addition to a payment of 70 ECUs per cow in respect of the dairy herd's contribution to beef production. One of the most important elements of this discussion is extension of the milk quota which is of concern to everybody in dairying. It is important that this extension be debated. The quota system has worked well in the Irish context and has saved many family farms.

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.

It is important to note that, 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 and 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 then it is preferable to signal it well in advance to allow the EU dairy sector and individual producers adapt and assist longer term planning. Changes to the current system designed to enable the EU enhance its presence on world markets should not result in a worsening of the income of dairy farmers. An overriding principle for me is, therefore, that any price reductions or other changes having an adverse effect on price should be accompanied by an appropriate direct aid system.

In relation to the arable crops sector, the key element of the Commission's 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 ECUs 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 ECUs per tonne is proposed for protein corps. 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 ECUs per tonne. Penalty set-aside would be abolished. The Commission's proposals stem from its analysis that intervention stocks are expected to reach 58 million tonnes by [955] 2005-6 unless some reform of the sector is undertaken.

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 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, then the reduction in prices must be fully compensated so that the incomes of growers are not reduced.

Rural development is a very important issue and I am sure Members will have major contributions to make on this subject. I believe that mainstream agriculture will remain crucial to the economic and social fabric of rural areas for the foreseeable future and that market policies will therefore remain of the utmost importance. Having said that, other measures are required to enable farmers and rural dwellers enhance their incomes and thus enable them to remain in rural areas. Given past trends in numbers employed in agriculture, the proposals for an increased emphasis on rural development in Agenda 2000 are therefore both necessary and welcome.

I also support the idea of integrating environmental goals into the CAP and believe that 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. We all want a good environment as it is a very important part of our lives. Budgetary resources must 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 and that process of reform 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 be 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 are preserved, the interests of member states are taken into account in balanced way and, above all, the incomes of farmers and the viability of rural communities are fully protected.

I am in the process of setting up four consultative groups, one each for beef, milk, cereals and rural development; Senators will understand that my Department, in setting up those consultative groups, is taking this proposed change very seriously. I will be inviting farmers, processors and others with a direct interest, as well as academics, to serve on these groups. These groups will remain in existence for the duration [956] of the negotiations and I expect an expert input from them so that the strongest possible case can be put in defence of Irish interests.

I am glad the Seanad is being given an opportunity to debate these crucially important proposals. I look forward to a constructive debate and I assure Members that I will be happy to take on board any suggestions which may be put forward which would assist in advancing the interests of Irish agriculture and of rural areas as I prepare for the next phase of the negotiations. I thank Senators for their attention and I look forward to hearing contributions from both sides of the House in this very important debate. Changes will occur in both rural and urban Ireland because of the proposed reforms. Under the guidance of the Taoiseach and the Minister for Agriculture and Food, Deputy Walsh, we look forward to a very productive outcome to the negotiations.

Mr. T. Hayes: I thank the Leader for arranging this debate. Since the formation of the new Seanad, there have been continuous calls for a special debate on agriculture. It is very appropriate that we have the debate at this time. However, I am very disappointed that the Minister for Agriculture and Food did not see fit to come into the House this afternoon. Agriculture is a subject on which many Senators wish to speak and this is the third occasion the Minister has failed to turn up. It is grossly unfair that he is not present for this debate but that should not stop us proceeding. As the Fine Gael spokesman on Agriculture I want this debate to be comprehensive, constructive, meaningful and informative. Above all, I want it to be a debate which will benefit not alone Irish farmers but the country in general. That is what agriculture is all about.

Agriculture is the backbone of the economy, despite the dwindling number of farmers, and will continue to be our main industry into the next millennium. There are 140,000 people who depend on the land for a living, and thousands more work in related industries. Villages and towns throughout Ireland are solely dependent on agriculture, and many industries in our cities depend on agriculture.

Agriculture has changed greatly over the past five years. There has been a resultant change in the rural way of life in comparison to what we knew many years ago. Some changes are for the better; others are not so good. However, the Santer proposals will cause even greater change. Those involved in agriculture are worried about what may happen, and as good Europeans we will take centre stage in this debate on these proposals.

The beef sector is our biggest industry, and there is concern about EU policies in this area. The Government must take a strong position on this matter and come forward with alternative proposals to fully protect the income and interests of the 100,000 livestock producers and [957] the £1.7 billion beef industry of which we are all so proud. A beef price above the cost of production, which is approximately 80p a pound, must be maintained at all costs. It is a tough task, but the Government cannot shy away from it. A combination of intervention and export refunds must be fought for. There are tough negotiations ahead that will require a hard approach from the Government.

We must also conduct a vigorous campaign to get consumers to realise that Irish beef is probably the best, safest and nicest beef in the world. Despite recent bad publicity, the majority of our beef producers are beyond reproach. I am a member of one of the first county councils to implement the Abattoirs Act which specifies that clean, healthy meat must be produced from slaughterhouses and butchers' stalls. Securing full premium compensation for farmers is a must. The Santer proposals will result in income cuts of £100 million for livestock producers; this must be fully negotiated. The Minister of State should take a hard approach to this and fight hard, though it will be difficult to change attitudes.

The Minister for Agriculture and Food, Deputy Walsh, has failed to open the live cattle trade to Egypt, and there is no excuse for this. When we debated this matter we were guaranteed that there would be cattle going to Egypt within weeks. That did not happen. While canvassing in the general election, I was asked about the live cattle trade because Fianna Fáil canvassers had assured people that if Fianna Fáil were in power, markets would open as Deputies Bertie Ahern and Joe Walsh would go to Egypt, and cattle boats would sail from Waterford, and all the cattle Ireland could produce would float out of the country. Those cattle did not float, and we are disappointed. Cattle prices are £60 to £80 lower than they should be because the export trade did not reopen. The failure of the Government to do so is a hallmark of its agricultural policy.

The dairy sector must take pride of place because of the efforts of those involved in it to develop their industry over many years. From Teagasc in research to the co-operatives and on to the farmers, many major developments have taken place which have put Irish dairy farmers at the top of the world league. The Minister of State comes from the heartland of Munster where he was involved in great developments with Dairygold that benefited dairy farmers. The dairy sector has enjoyed reasonable prosperity recently. The Santer proposals suggest that milk price cuts be made and that farmers be compensated by direct payment. This is a grey area and is at an early stage of debate, but it is a worrying proposal. It would leave us very vulnerable to export refund cuts. A decision can be made at the Council of Ministers to cut it in 12 months time, which is worrying for farmers. The direct compensation payment proposals to offset the impact of the Santer price cuts on dairy farmers are a far more [958] expensive way, in EU budgetary terms, to support farmers' income than the existing market supports. Most dairy farmers want to continue earning their income through sales of their output rather than through a cheque in the post.

The Commission is not planning any significant increases in the EU budget in the context of the proposed enlargement of eastern Europe. Direct payments to farmers will become increasingly political and publicly vulnerable. Once the price cuts are forgotten, the reason for direct financial transfers to farmers will also be forgotten. There will be pressure in the media and political circles which may endanger direct compensatory payments to farmers and Ireland will lose out because of this.

When the dairy industry is discussed one must refer to the quota regime. There are many positive aspects to the quota regime to which the Minister referred and with which I agree. There are many younger dairy farmers who are anxious to increase their quota but cannot because of restrictions, financial and otherwise. As a country largely dependent on dairying and with many small dairy farmers, we must try to negotiate a quota increase within the proposals.

There is a special case to be made for Ireland. We are a country of smaller farmers with a precious and unique way of life. We may talk of rural development and keeping people on the land, but there is no way of keeping a small farmer on land unless he has a reasonable milk quota. We should make a special case at European level for an increase in our milk quota. The Minister may say this is not on. However, he should be looking for an increased Irish quota with an iron-fisted approach and a well fought case.

I appeal to him to use his considerable influence in the Cabinet to restore installation aid for younger farmers. I attended a meeting in my constituency recently where I heard from people needing installation aid to take over the family farm. I know from experience when I took over my family farm that it is a difficult time for a young person. There are many financial commitments such as stamp duty and reorganisation of the family structure.

There is concern about people not receiving their premium payments. Premium payments are now part of people's income, and they are entitled to receive them on time. No agreement should be made outside the Charter of Rights which was agreed many years ago. The charter recorded what premia people are entitled to. I urge the Minister to ensure people get these payments on time.

Mr. R. Kiely: I welcome the Minister of State to the House where he started his successful political career. Unfortunately he served here during my enforced leave of absence. I agree with Senator Tom Hayes that agriculture is the backbone of our economy. The reform of the CAP has been an ongoing phenomenon in Irish agriculture [959] since the late seventies in that guaranteed prices for farm products covered by the CAP were reducing in real terms. Up to 1992 this price adjustment took place without compensation. However, the MacSharry reform package of 1992 introduced the concept of reducing price support and compensating farmers by direct payments — the so-called “cheque in the post” system. As a consequence, we now have reduced prices for cattle, minus 15 per cent, and cereals, minus 30 per cent, coupled with limitations on cereal acreage and the ten and 22 month special beef premia, suckler cow quotas and sheep quotas, in addition to the milk quota which was established in 1983.

To compensate for the price reductions in cattle and tillage there are area aid payments, suckler cow premia, ten and 22 month special beef premia and the CAP accompanying measures. There are also extensification premia to encourage more extensive farming and a deseasonalisation premium to encourage a more even production spread through the year. It should never be forgotten that the direct payments to farmers are in respect of compensation for reduced prices and not a bonanza as they are often described by less well informed people.

Proposals for the future direction of the CAP are set out in the Santer Agenda 2000 package. The main areas of interest in the package as far as this country is concerned are the beef, dairy, cereals and Structural Funds proposals. It must be stressed, however, that much of the detail of these broadly sketched proposals are as yet unknown and will probably not be available until early 1998. Their full impact cannot, therefore, be estimated accurately at this stage.

Despite some rigidities associated with strict supply control, the quota regime has benefited the dairy sector since 1984. The operation of the quota has maintained high income levels among dairy farmers. Of equal importance in Ireland is the role the milk quota plays in maintaining viable farming activity in less advantaged rural areas through instruments like restructuring and temporary leasing schemes as well as ring fencing of the quota in these areas. The quota system has been a successful tool of economic development for Ireland and other EU member states. For this reason, I agree with the Commission's analysis that there is no immediate need to make significant changes to the quota regime.

I acknowledge that the momentum for change to the milk regime is gathering pace and will intensify over the medium term. The main pressures for change, highlighted by the Commission in its analysis, are demands for further reform in the next World Trade Organisation round and enlargement to include the first six accession countries. In the milk sector this will inevitably lead to pressure for reform of the guaranteed price system. The Commission in Agenda 2000 has acknowledged that some liberalisation of the [960] milk regime is required. If change is required it is preferable to signal it well in advance to assist longer term planning in the sector.

Senator Hayes said we should look for an increased quota. I would like to see an increased quota as I am sure would the Minister of State and the Minister. I am sure they will do everything possible to acquire such an increased national quota.

The quota, which is the cornerstone of the milk regime, has, in general, maintained producer income. Any move away from this system should not result in a worsening of dairy farmers' income and any proposed price reductions must be accompanied by an appropriate direct aid system. While this principle is explicitly accepted in the outline proposals, full details are still required on the actual level of, and the mechanisms for, compensation likely to be paid.

Commission analysis suggests that the market for dairy products is expanding. I broadly share this view and believe this will continue to be the case over the coming years. If the EU dairy sector is to grow and develop to its full potential it is crucial that the EU maintains a strong presence in that expanding market. Any retreat from this position over time would seriously undermine the long-term viability of the EU dairy sector.

In order for the EU to retain world market share, possible adaptations to the quota regime might have to be considered to allow for more flexibility while at the same time minimising disruption to the existing system. Serious consideration should be given to possible arrangements which would allow the EU share in the expanding world market and which could facilitate transition to a less restrictive regime beyond the year 2006.

As Senators know, the beef sector is of key importance to the economy and accounts for over one third of agricultural output. As the largest beef exporter in the northern hemisphere, we export some 90 per cent of our annual beef output both to other EU member states and outside the Union. Clearly, with such dependency on export markets, we were in an exposed position when the latest and worst BSE crisis broke in March 1996.

Prior to this disastrous event, the reform of the beef sector agreed in 1992 had been working well. The combination of reductions in institutional prices with increased direct income payments which were linked to supply control together with relatively favourable international markets meant that the European market was close to balance and producer incomes were more secure than had been the case previously.

The fallout from the BSE crisis changed all that as beef consumption plummeted, third country markets closed and intervention again became the market of last resort for large quantities of EU beef. In response, the Council agreed a number of compensation packages and reached agreement last October on a package of measures designed to reduce production, in particular by [961] the early slaughter of calves and the early marketing of veal calves. In addition, the over 30 months slaughter scheme in the UK helped to bring better balance to the market. Both of these schemes have removed three million animals.

The impact of these measures will be felt in the medium term. Nevertheless, the longer term forecasts are for further market imbalances in the context of the general trends in beef production and consumption together with the forthcoming world trade round.

The Commission has responded with outline proposals which, broadly speaking, continue along the route charted in the MacSharry reform of the beef sector by proposing to reduce price support and increase direct income payments to farmers.

The Commission's proposals are hugely important for Ireland because of the central role of beef production in our economy. Market imbalance in the European beef market leaves us, as the major surplus producer of beef, the member state which is most vulnerable at the bottom of the price league. The litmus test not only for Ireland but for all other member states is, will the Commission's proposals, if implemented, restore market balance and sustain producer incomes?

The proposals are designed to increase beef consumption by reducing beef prices while at the same time enabling non-subsidised exports of EU beef to third countries, in particular the south-east Asian market. Beef consumption within the EU should increase, but it is difficult to predict by how much and it is unlikely to reach pre-BSE levels given the longer term downward trend in beef consumption over recent decades.

It is assumed by the Commission that the 30 per cent price cut proposed will enable EU exporters to export substantial quantities of beef without export refunds thereby avoiding GATT constraints. It is debatable whether the EU can achieve the market penetration envisaged with the level of price cuts proposed. Careful examination of the price structures and production potential of our major competitors is required. In this context, I do not think the future of the beef regime can afford not to retain an adequate safety net in difficult market circumstances and where major market imbalance remains a threat.

The second 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. We will be seeking to ensure that any cut in price is fully compensated. In addition, any final package which is agreed must ensure that extensive grass-based systems are not disadvantaged as against the more intensive bull producing system in the EU. The proposals as they stand would appear to be more biased in favour of intensive beef production than the 1992 reform. We should take great care before undoing the achievements of the past. One of the lessons we must learn from the BSE crisis is that extensive methods of beef production, [962] which are environmentally friendly, must be encouraged now more than ever before. I note that the Commission will reflect on how incentives to extensify production can be improved and I await its proposals with interest.

With regard to cereals, it is difficult to quarrel with the Commission's analysis that increasing stocks by the year 2005 will pose a major strain on the Community's budget and will create market problems when these stocks are being disposed of. The Commission's response is a reduction in the support prices for cereals, which will ensure that Community prices will be more in tune with world prices——

Mr. T. Hayes: They will not last until then.

Mr. R. Kiely: ——thus facilitating the disposal of surplus stocks without subsidy and improving the competitiveness of cereals as a feed ingredient. The reduction in the intervention prices must, however, be fully compensated for so that growers' incomes are not reduced.

The next round of Structural Funds will come up for examination at the same time as the future of the CAP. These funds will play a major role against the backdrop of CAP reform and enlargement. Clearly, the Structural Funds have played an important part in developing all segments of the economy. However, while we have undoubtedly made progress in closing the economic gap with the rest of Europe, considerable work still needs to be done and further substantial Structural Funds will be fully justified to complete the modernisation of the economy.

As Ireland will be an Objective 1 region in transition, one of my main concerns will be to ensure that there will be no sudden fall in funding for our main structural schemes, which the Minister of State has outlined as being most important. Mainstream agriculture will remain crucial to the social fabric of rural areas and to the local and national economies for the foreseeable future. I support any wider rural development policies in Agenda 2000 which will enable farmers and rural dwellers to enhance their incomes and thereby remain in rural areas. Given the agricultural situation, particularly the continuing decline in the number of farms and the numbers employed in agriculture as outlined in Agenda 2000, the proposals for an increased emphasis on rural development are both necessary and welcome.

I also support the idea of integrating environmental goals into the CAP. The best way forward is to strengthen and extend existing measures aimed at maintaining and enhancing the quality of the environment in general. Budgetary resources must 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.

[963] CAP has already been the subject of extensive reform which is set to continue. It is in the interests of Ireland and other member states that European agriculture becomes more competitive on world markets and is developed on a sound, stable and sustainable basis. However, it must also be done in a way which ensures that the principles of CAP are preserved, that the interests of member states are taken into account in a balanced way and that the interests of farmers and rural communities are fully protected. While the general direction and preferred policy options have been put forward by the Commission, a huge amount of work at all levels of the decision making process will be done before decisions can be taken. The European Parliament will have an important input to make and I am confident the Minister will ensure that Irish agricultural interests will be fully protected.

The Minister stated that four consultative groups will be set up for beef, milk, cereals and rural development and that he will invite farmers, processors and others with a direct interest, as well as academics, to serve on them. These groups will remain in existence for the duration of the negotiations and he expects input from them so that the strongest possible case can be put in defence of Irish interests. The interests of these groups will not displace the normal process of consultation with farm organisations, processors and other interest groups. I wish the Minister every success in his negotiations to ensure the interests of Irish farmers are protected.

Mr. T. Hayes: Will the Senator send the Minister an invitation?

Mr. Connor: I welcome the Minister of State to the House and I congratulate him on his appointment. However, I regret that the Minister, Deputy Walsh, is not here, although that is not to denigrate the presence of the Minister of State.

Mr. R. Kiely: He is busy.

Mr. Connor: He may be busy but it shows disregard for this House. This debate was requested by our agricultural spokesperson many weeks ago, so it is surprising that the Minister did not make himself available.

I will not dwell on the Santer proposals which have been discussed at length by Senator Hayes because I want to concentrate on current agricultural issues. I want to quote from a questionnaire which was sent to all political parties last May by the country's largest organisation, the Irish Farmers Association, asking them for commitments on what they would do in Government. The first question read: “Does your Party support the provision of the necessary resources to prevent any cut in headage payments in 1998 and 1999?” Fianna Fáil's response was as follows: “Yes. FF are fully committed to maintaining present levels [964] of headage payments”. The Progressive Democrats also said yes. Another question read: “Will your Party ensure that the Control of Farmyard Pollution and Dairy Hygiene schemes are reintroduced following the mid-term review of the Structural Funds?” Both Fianna Fáil and the Progressive Democrats said yes.

I contrast that with the figures in the 1998 Book of Estimates. Subheads M1, M2, M3 and M4 deal with schemes operated to implement EU structural regulations and directives in Ireland by the Department of Agriculture and Food. The previous Minister, Deputy Yates, provided £64.74 million for farm investment schemes, such as the control of farmyard pollution scheme, the farm improvement scheme and the dairy hygiene scheme. Now those who gave affirmative replies to the IFA's questions propose to cut expenditure in 1998 to £36.11 million, a decrease of 44 per cent. How can the Minister defend that?

I heard Fianna Fáil spokespersons give specific promises to meetings of Macra na Feirme and the IFA that the farm installation scheme, which was abolished in August, would be reintroduced. Last year £5.677 million was provided for this scheme. However, the figures for 1998 show that only £1.159 million will be provided, which is an 80 per cent decrease. How can the Minister defend the abolition of a scheme as important as the farm installation scheme? This scheme encourages young farmers to take over farms by giving them a small grant. It is the cheapest form of job creation. Approximately £5,000 is given to a qualified farmer. How can the Minister justify such a reduction?

In 1997 £8.2 million was provided for farm diversification, which includes agri-tourism and mushroom production. Agri-tourism is expanding as farmers become more involved in alternative enterprises, such as bed and breakfasts. This is contributing to the economy, particularly the tourism economy. The mushroom industry and other horticultural enterprises are also expanding and we should encourage them. Our main lines of production, that is beef and milk, are in surplus. Of course we should encourage alternative produce and alternative enterprise on our farms, but what do I find? Some £8.2 million was provided by the previous Minister in the current year whereas £7.7 million has been provided by the Minister for the coming year, a massive reduction of 15 per cent.

These are just a few matters which are very important to the agriculture industry. The Minister may be replying by and large to the points made on the Santer proposals — Agenda 2000 — but these are issues which affect farmers, the agriculture industry and its contribution to the economy. Instead of the State withdrawing from issues, such as the control of farmyard pollution, installing young farmers on the land and putting in place schemes for proper dairy hygiene and agri-tourism, it should be increasing expenditure in these areas. Will the Minister explain why he [965] made that kind of reply — a similar question could be put to the Progressive Democrats because they are also part of Government — which was published by the IFA in the leading farmers' weekly, the Irish Farmers' Journal? We stand over the replies which my party made but the Minister is not doing well in standing over or, worst of all, carrying out what he promised to do and that message was sent to the electorate.

The delay in the payment of income supports to farmers is a scandal. The Minister is bound by the charter of rights agreed between the then Minister, Deputy Yates, and all the farming organisations, principally the IFA, which was negotiated two years ago. He is bound by that agreement to commence making payments for headage, that is, the beef cow scheme and beef premium where they become payable on 1 September and to ensure that all payments are made by 31 October. That is written in black and white in the agreement. Unfortunately, I do not have a copy of it with me or I would quote the clear commitment which was made in it.

This year, at the end of October, over 40 per cent of all headage payments remain unpaid. No doubt the Minister of State hears hundreds of complaints about unpaid income supports from farmers in his constituency every day. Every one of my colleagues on this side of the House will testify that they receive telephone calls and letters on a daily basis from farmers awaiting these payments. Why was that agreement broken? Why did the system operate in 1995 and 1996 and break down when the Minister for Agriculture and Food, Deputy Walsh, in keeping with his previous reputation in these matters, returned to office? Why must farmers wait until the end of the year and maybe next July until all of these payments are cleared? I want an answer because there is a clear connection between Minister Walsh, delayed payments and broken promises. We have independent figures and even if we did not, we know from the farmers who are after us night and day about these issues.

The Minister should remember that supports are needed in these difficult times because headage payments, for instance, are paid by and large to livestock farmers and nobody has suffered more in the recent BSE crisis. I do not blame Fianna Fáil for the BSE crisis in the way they tried to blame us when we were in Government, but at least the response of the Government should have been to enhance that the income supports, many of which, such as the beef premium, are funded wholly by the EU, are paid on time to the farmers entitled to them.

Livestock farmers' incomes fell by 13 per cent in real terms. According to the best estimates, they will be down by 5 per cent in real times in 1997. That is an accumulated drop in incomes in the major sector of agriculture in two years of 20 or 21 per cent or more. No other sector of the economy has suffered like that. The economy is booming and that leads to economic growth, [966] which is expressed in higher incomes and better living standards for everybody except——

Mr. N. O'Keeffe: And the farmers are booming.

Mr. Connor: ——the livestock farmers who are being deprived of their entitlement by this Government. That is the reality.

I want to make a few points which will graphically bring home to the Minister of State the effects of cutting the headage payments, that is, the cattle headage payment, the beef cow scheme and the sheep headage payment. Normally, that involves finance of £110 million in a single year and the Minister is proposing to cut it to £87.8 million in 1998. Will the Minister of State tell me how he can fit that pint into the half-pint glass? Headage payments have not increased for several years. If one looks at the Estimates for the past few years, the figure has remained constant at about £110 million. Will the Minister of State explain how that headage money will be distributed without excluding some people? Will he reintroduce the off-farm income bar? Will he exclude farmers who are receiving a pension? Will he confine the amount of money to £3,000 in any one case and no more?

Mr. N. O'Keeffe: Is the Senator saying that we should do so?

Mr. Connor: It is up to the Minister. If we were in Government, we would have provided adequate money so none of these matters would have arisen. It is up to the Minister to tell the Seanad. The purpose of this debate is to find out exactly what is happening.

An Leas-Chathaoirleach: The Senator has about one minute left.

Mr. Connor: I have much more to say and I beg your indulgence, a Leas-Chathaoirligh.

Will the Minister inform the House about this because, if they know the details of the reduction, they must have worked out the details of how it will apply to farmers? The Minister should remember if these proposals go ahead that payments to farmers — these are usually the smaller farmers who are on the lowest level of income — in his county, Cork, who will receive £9.77 million in headage payments in 1997, will be reduced by almost £2 million to £7.82 million. The farmers of my county, Roscommon, one of the poorer counties which is almost totally dependent on livestock and grassland farming, received £6.8 million in the current year from headage payments. If the Minister's proposals go through, we will get £5.44 million, a reduction of £1.36 million. I do not know what the Minister is going to do about County Cork but I can assure him that I will fight to ensure the farmers in my county and the constituency which I have represented will not suffer [967] that because this is outlandishly unfair to them at a time when they are on their knees due to the income they receive from the commodity which they produce. My advice to the Minister is to ensure that the funds for that scheme, which is primary to the farm income support of small farmers, is reinstated. If it is not, he will sorely regret it.

Mr. Gibbons: I welcome the Minister and congratulate him on his appointment.

A number of the points raised by Senator Connor are very relevant. The situation with regard to the Santer proposals is such that the implications for this country are enormous. It is that context that I put forward the suggestion to the Minister that it is time we had a national debate on the future of agricultural policy. It should extend further into the area of land use. The connection between agriculture and land use is extremely important and it has been neglected over many years.

Production has been curtailed during the past ten to 15 years by means of quotas and various schemes. In that context, the opportunities available to members of the farming community in particular have been restricted. Consequently, these people have been obliged to work in a vacuum to try to maintain their living standards. While progress has been made in respect of making aid available to farmers to sustain their incomes, problems still exist of which the Minister of State is aware. We must think in terms of the finite asset at our disposal, namely, the land. That asset restricts us in respect of what we can do and it is important to consider how it will be used in the future.

We can continue to discuss the Santer proposals and their implications for individual commodities until the cows come home and try to obtain the best deal possible for Irish agriculture within that context. However, it is time we decided the direction we propose to take in respect of agriculture and the emphasis we intend to place on various areas in the next ten years. There has not been such a focus on agriculture since the 1970s, when the emphasis was placed on increased production. However, the European situation was different at that stage and major surpluses, with which we were obliged to deal, resulted. From the point of view of agriculture, we must not think only in terms of production and the production of various commodities — we must consider the entire system of production, right through to the consumer. Every aspect of this system must be considered in the overall context of a national strategy.

Horticulture is extremely important and is probably the one area, in terms of land use, where there is potential to expand. Our horticultural produce, be it nursery stock or vegetables, is second to none in Europe. There is enormous potential to develop this area which would lead [968] to greater import substitution. We must focus on this area and see how it relates to agriculture. Are there opportunities for producers to diversify into this area in the future? If such diversification occurs, it must be carried out in a planned way. For example, potato producers could not suddenly decide to begin producing onions because their equipment is geared towards this. Such behaviour would cause problems and, therefore, diversification must be planned properly.

There have been particular problems in respect of forestry in recent years. The general thrust of our policy in this area is positive. It is important that we build up the stock of woods available in Ireland for various reasons. However, the implications for the areas in which new trees are planted and their aesthetic effect must be borne in mind. We must also ensure that people have access to proper amenities when using these areas for recreation purposes.

It is also important to consider the species of trees being grown. Rather than producing soft woods on poorer quality land where growth rates are extremely high perhaps we should place more emphasis on producing hard woods, possibly on better quality land. In that context, a number of years ago a person was asked why hurling is good in certain areas. They replied that it had to do with the quality of the land which produced quality ash. Hence, the hurling and ash are good in east Cork and Kilkenny.

Mr. T. Hayes: What about the premier county?

Mr. Gibbons: I was referring to areas where hurling is traditionally good.

The environmental aspects affecting agriculture are important. The recent debate regarding the level of phosphates and nitrates in our water is important. From the 1950s to the 1970s efforts to increase production led to farmers being advised to use more fertilisers. That was the correct approach at the time but the use of these fertilisers is now causing problems. This is another aspect of the overall strategy which must be considered. The debate which appears to be developing in respect of the measurement of phosphates in the land must be clarified in the near future because UCD disagrees with Teagasc with regard to recommendations for the use of phosphates on the land. These recommendations, which are necessary in terms of the cost of production and the environment, are vitally important. That is also true in the case of forestry and horticulture.

As Senator Connor stated, another area of importance involves agri-tourism. What is our policy on diversification into this area? Diversification into agri-tourism would give a number of people who might otherwise be forced to abandon the land the opportunity to remain on it. One of the primary objectives of a national policy on agriculture should be to sustain the highest possible number of people living in rural areas. We [969] must consider introducing a form of rural renewal scheme similar to the one put in place in recent years.

Mr. T. Hayes: The Senator should be careful not to leak any information.

Mr. Gibbons: Efforts must be made to provide those living in rural areas with the opportunity to get agri-tourism off the ground on a constructive basis. Tourism generates major income and the link between it and agriculture is vital.

There are two other proposals I would suggest in respect of a national policy on agriculture, one of which involves consideration of our landscape. As a practising landscape architect, I must declare an interest in this area. Greater consideration must be given to planning and the location of various things. For example, in respect of forestry we must look at where trees are and are not being planted. We must plan carefully where things are located. As has happened in various parts of the country, the amenities we want tourists to see are hidden. The beauty of our countryside must be enhanced, not hidden.

Will the Minister of State consider the reintroduction of installation aid in some form? It is vitally important for the continuity of agriculture that young people entering the area be educated to the highest possible standard so that they can compete in the difficult environment to which they are being exposed. We must also provide them with the opportunity to become involved in working the land as early as possible. When a person starts out in life they have vigour and fire in their belly but as they grow older they have greater commitments and the opportunities for diversification and high production tend to dissipate because of other responsibilities. There is a need for more young people to make decisions in rural areas. It would be a welcome development if installation aid could be reintroduced in some form to encourage this.

With regard to brucellosis the present circumstances are worrying and many herds are under restrictions because of it. I would like to hear the Minister's views on the reintroduction of vaccination for brucellosis. In the past when the disease was at a low level vaccination was available and, having been vaccinated, the cows carried forward a resistance to the disease for a number of years. Therefore, when vaccination was discontinued its effects carried forward for a few years. However, the country's stock has lost that resistance to brucellosis. We need to examine this matter closely.

The time has come for a national debate on agricultural policy. I would like to think that it could take place soon and for as long as is necessary to plan our approach for the next ten years, at least. I would not object to the involvement of all interested parties. Ultimately, we depend on the production and consumption of food.

[970] Senators from all parties could contribute to such a debate as vigorously as they have on this matter.

An Leas-Chathaoirleach: I welcome the Minister of State, Deputy Davern, to the House.

Mr. Caffrey: I also welcome the Minister of State. I speak on rural development from a western perspective. I was surprised and disappointed at how little time the Minister of State, Deputy O'Keeffe, devoted to rural development in his speech. It does not reflect the gravity of the issue. His ideas were barren. He said:

… mainstream agriculture will remain crucial to the economic and social fabric of rural areas for the foreseeable future and … market policies will therefore remain of the utmost importance.

Mainstream agriculture will not keep farming in the west economically viable and rural development comes into play in that context. The Minister of State can only propose that:

[He] is in the process of setting up four consultative groups, one each for beef, milk, cereals and rural development … [and he] will be inviting farmers, processors and others with a direct interest, as well as academics, to serve on these groups. These groups will remain in existence for the duration of the negotiations and [he expects] an expert input from them.

There is a plethora of development agencies which have been piling up reports on the problems of agriculture and the west for many years. They are largely ignored or shuffled into a bureaucratic siding to give the impression that motion on the paper trails will be accepted as a substitute for the policies of positive discrimination which are needed in the west, especially in relation to the next tranche of Structural Funds. Retaining Objective 1 status for the west must be a priority. Structural Funds were provided on the basis of per capita income yet the west did not receive its fair share of those funds. The new tranche of funds should address this problem.

The prospects for rural development can be summed up in job terms. I link industry and agriculture because in socio-economic terms they are Siamese twins — one cannot exist without the other. There are 9,093 on the live register in County Mayo and north Mayo is plagued by inadequate roads and rail services. The flagship industry in the area, Asahi, has announced its closure which will make the jobless figures worse. It will wind down this month and it is little consolation to my constituents to hear announcements of jobs elsewhere in the country. There is no proof of the Government's commitment to the west.

There is an over-concentration of development in Dublin, Limerick, Cork and Galway and equating this with national growth or prosperity is “spin doctoring” at its most fatuous. The public [971] is working out what is happening. Dublin is like a suction machine, drawing more and more from the regions. More job opportunities are being created in the main cities while west of the Shannon, in places such as Ballina, Kiltimagh and Claremorris, there is no evidence of commitment from the IDA to improving job figures. Recently the IDA has begun to sell off the land banks it had for industrial development in small towns such as Ballinrobe and Newport.

Instead of productive policies of encouragement the Government is sterilising large areas of scenic bogland by classifying them as special heritage areas and tourist reservations. This combination of industrial and agricultural sabotage of the west's potential is overshadowed by the greatest betrayal of all — the ransacking of EU Structural Funds. These funds were attracted originally for the development of disadvantaged areas but the money has been channelled to the east coast and other areas which are now bursting at the seams.

I was disappointed with the Minister of State's commitment to rural development, especially in the west. The west has been isolated from the other regions. The Government's transport priorities indicate how less favoured the west is when compared to other areas. The rail line from Dublin to Westport is the only one in the country that is not earmarked for co-financing. As a result there is a substandard rail line to the west which must depend on Government funds for upgrading or development. There was a near tragedy a fortnight ago when a train was derailed on its way to the west. That event highlights the substandard rail infrastructure. There was adequate rolling stock in use on the route to the west but it has disappeared from that route. I found out from an Irish Rail official that it has gone to Kilkenny. We are left with even more substandard rolling stock than heretofore.

The Association of Secondary Teachers in Ireland was told recently that the reason Ireland attracted so much American technology was that we had the best education system in the world after Singapore. One third of the per capita entry to third level education comes from the western region. Students from the west, in particular Mayo, are prepared to travel anywhere, even abroad, to further their careers. Indeed, bus loads of students may be seen travelling to and from the various third level centres in Dublin each week. Not only is this denuding our population, but it is distorting census figures produced every four years because these students leave the west on a Sunday evening when the census is carried out.

The reduction in the population is also reflected in the fact that the constituency of Mayo lost one of its Deputies in the last general election. Mayo was reduced from two three seat constituencies to a single five seat one. Farming alone will not sustain the people of the west and [972] an imaginative policy for rural development is needed if we are to achieve population growth.

As chairman of the Ballina Industrial Development Association, I recently welcomed a new technology company, Lionbridge, to Ballina as an expansion of its Dublin base. This company made a decision to reverse the national trend and locate its new venture with 50 new jobs in Ballina where it found the facilities and educated workforce it needed. Its workforce will be trained free from poaching of trained staff by some of the bigger international companies in Dublin where competition for skills is at its fiercest. Hundreds of such small companies are locating in Dublin causing a mounting problem both for management and staff. New technology offers the west independence from the distance and peripheral factors which have militated against the location of heavy industries there. The Lionbridge reverse strategy on location will be watched eagerly by other technology companies.

We have an opportunity to facilitate positive relocation thinking by companies in the computer and information technology areas by providing incentives to locate west of the Shannon. This would be particularly desirable not only from the viewpoint of arresting western rural decline but from that of erasing Dublin's social problems. The country is hopelessly lopsided and the quality of life in Dublin under progressive Governments has deteriorated.

Local initiative is not dead in the west, it simply needs to be taken out of the smoulder of bureaucratic red tape and the proliferation of confusion which mark existing piecemeal development policies. I have seen achievements in facilitating jobs on slender resources which mark the operation of voluntary agencies such as Moyvalley, IRD and other Leader groups. In the context of rural development, the Minister should try to encourage greater liaison between Leader groups and the agricultural community because there appears to be a lack of cohesion between them. Many Leader groups are showing much initiative in the area of rural development and they must be encouraged.

We were all disappointed by the lack of funding for Leader groups in the last tranche of funds. Funding was cut by half and this is reflected in the amount of work Leader groups and voluntary organisations may take in hand. One of the first integrated resource development companies was established in Ballina six years ago. It took up the baton of rural development in the region and was a considerable success. It is unfortunate funding in this area has been drastically cut by both Government and Europe. It is the only agency which gets money directly from Europe and does not have to go through bureaucracy involving central Government and Departments. That is an area of rural development at which I would like the Minister to look and see where improvements may be made.

[973] Knock Airport also has potential. An industrial estate has finally been recognised as a catalyst for tax incentive development. The previous Government designated Knock as a tax incentive area but there have been no developments since this Government came to power. Industry in this area is vital for the economic prosperity of the region because mainstream agriculture will not survive unless it is twined with a vibrant industrial atmosphere. The future lies in more dynamic rural development and positive discrimination in this area. The bottom line is that more resources are required because funds to many development agencies have been cut, especially in the west. I have firsthand knowledge of Leader groups which are desperately short of money. Much of the State aid which they received has gone on administration and little has filtered down to those at grassroots level.

Self-catering accommodation, which was a major development, has been cut by 50 per cent. Such accommodation attracts people to rural areas thus creating a more positive and healthy environment. I would like the Minister to look at this and other issues. No initiative has been shown by the Government on rural development.

Mr. O'Brien: I thank the Leader for providing time for this discussion on agriculture. I resent the attack by Senator Connor on the Minister and the Minister of State. He engaged in scaremongering by saying that Cork would be over £2 million short next year in relation to area aid. He has no proof of that. The country will not be short next year and I would safely say that the Minister and the Minister of State will ensure Cork is not short. I resent the Senator's remarks about the Minister who, with the Ministers of State, is doing an excellent job.

Ireland is dependent on a successful agriculture industry. With so much of the working population employed directly or indirectly by the industry, it is of obvious importance to the economy. Rural Ireland and its villages and towns survive on the money generated by farming and the agri-business in their areas. The recent fall in farm incomes has had a serious effect on rural areas as young people are moving out of agriculture to seek more rewarding work in the industrial sector.

The EU continues to reform its agricultural policies. We are now presented with the Santer proposals which, if adopted unamended, will have a disastrous effect on agriculture, especially on the beef sector where prices are already bad at only 80p to 85p per pound, a 20p to 25p per pound drop from two years ago. The proposal to cut intervention by 30 per cent is unacceptable. I urge the Minister and the Department to ensure the protection of the largest agricultural sector involving 100,000 livestock producers. A 30 per cent price cut will reduce output in the beef and livestock sector by £344 million. With compensation of only £265 million, this will result in a net [974] loss to the economy of £88 million. The EU must recognise our dependence on the market supports of intervention and refunds. With our extensive grant aid production system, our dependence on exports and with the cost of production estimated at 80p per pound, does anyone think the industry can survive at a price of 60p per pound? The future of the beef industry must be protected with a meaningful market price which gives producers a decent living. Full premium compensation must be paid to producers for price cuts; a special heifer premium is now essential.

The milk quota system has existed since 1984. The Commission President, Mr. Santer, suggests a 10 per cent price cut to be compensated for by direct payments which offer little guarantee of future income. These proposals on the milk sector must be explained in greater detail. With milk quotas now expected to last up to the year 2006, the system must be restructured to allow young farmers to enter dairying and to give greater opportunity to smaller dairy farmers to increase their quotas. What was a reasonably sized quota in 1984 is now too small to provide a viable income for a farm family. Recent figures showing a significant drop in the numbers of young people entering agricultural colleges are alarming. Young people turn away from farming because they see little opportunity for the future. Dairy farming is one area which must be open to new entrants.

Grain farmers will suffer serious income drops if the Santer proposals are accepted, with winter growers particularly affected. Farmers cannot afford to sell crops at below production costs. While sheep and pig meat are not directly affected, the general price cuts in agriculture will also affect those key sectors. It is very important that installation aid be reinstated; I know the Minister and the Minister of State are looking favourably on that. It would give young people an opportunity to enter farming.

I compliment the Minister and his Department for their continued work to improve the agriculture industry. It is under great pressure, especially the beef sector where prices are set to fall again this week. I am aware of the Minister's continued efforts to reopen the beef markets and the important live export trade. I believe a delegation has travelled to Egypt, which is good news, and I hope that market will be reopened shortly.

Mr. Coghlan: These proposals are alarming and frightening. Irish agriculture is at a crossroads and the Minister and the Government have an onerous duty in regard to its future. We have depended heavily on agriculture in the past. Towns throughout the country are dependent on their agricultural hinterlands. It is a pity and a tragedy there has been so much unfair, undue and unjust criticism recently of our hardworking farming population.

[975] We need much more rural development. Agri-tourism has not developed and more grant aid and guidance are needed. Many people anxious to invest to improve their lot and that of their rural communities often do not know whether they should apply to the county enterprise board, to the Leader programme, etc., to obtain assistance and chart their development properly.

The proposed cutbacks in headage payments are very serious and are unacceptable as they pose a threat to livestock. The farming community is depending on the Government to tackle this issue. The Santer proposals will prove a disaster and will require significant amending if we are to have a proper healthy agriculture sector in future. I refer specifically to the proposals to cut back headage payments for small hill sheep farmers by 20 per cent. It is imperative that the Government's proposals to restrict sheep headage in 1998-99 be reversed. The Government gave a commitment before the election not to tamper with the headage mechanism until the end of the current round of structural funding. The Government's proposals, if implemented, will greatly exacerbate the small hill sheep farmers' severe income problems because the payments of ewe premiums and sheep headage account for almost 100 per cent of their net income. These farmers have no alternative to sheep farming. The proposals to cut headage by £22.5 million would represent a reduction of £2 per ewe for each farmer who are already on their knees. I say to the Minister and the Government enough is enough. These farmers will not be able to exist if they suffer any further reduction in income.

Mr. Callanan: My understanding was we were going to have statements on the Santer proposals. There has been a great deal of wandering. It was signalled this time last year that there was not sufficient funding for the installation aid to continue through this year. It was not this Government who disbanded the dairy hygiene grants or the control of farmyard pollution grants but it will be this Government who will restore them. With the Leas-Chathaoirleach, the Minister for Agriculture and Food and Minister of State O'Keeffe all being from Cork, and the Minister of State present from just over the Cork border, together we will achieve that restoration.

Mr. Davern: I had always heard that Cork was a republic on its own.

Mr. Callanan: There was a time when it was popular to say “my land is my own, I can do what I like with it”. That is no longer the case and many farmers have been worried about that for a considerable time. There was a well known Dáil parliamentarian who said “One more cow, one more sow, and one more acre under the plough”. That day is gone.

The comments I make on the Santer proposals [976] will be general because the details of the proposals are not yet known, but the broad parameters are. If we are to take those as guidance as to what the details of the proposals would be, then Irish agriculture, farmers and those allied to the industry are in for a shock.

The CAP reform 2 proposals are an extension of the 1992 MacSharry CAP reforms. This involves direct compensation for price on income cuts but with certain limits, overall in some cases or per hectare. While the direct payment system is sold as an efficient method of supporting farmers' incomes, it is more expensive in budget terms than price supports. Thus the CAP budget becomes a limiting factor. A high level of dependence on direct payments also increases the political vulnerability of the CAP; for example, market supports through import tariffs are not viewed as subsidies whereas direct payments are not only seen as subsidies but their role as compensation for past price cuts may be quickly forgotten.

It is apparent the Commission envisages the CAP direct payments would not apply to farmers in future member states of an enlarged EU on the grounds that they would not have suffered the price cuts in the first place. The Commission intends to offer instead some structural aid which is obviously necessary. It is unclear whether this would apply during the transition period only or on a more permanent basis. The African countries are unlikely to accept that a cereal farmer on one side of the notional border would receive £300 per hectare in direct payments under CAP while his counterpart on the eastern side of the border would receive nothing, although both are selling their produce at world market price levels; enlargement on the cheap in other words. That is what the Santer proposals as structured put forward. The former eastern bloc countries would not accept that. It would be difficult to achieve with significant implications for the cost of the CAP budget in the longer term.

The major implications for Irish agriculture are that the Santer proposals in the beef and cereal sectors would cut prices to below the cost of production. This has dangerous long-term implications for farmers. When prices are lower than production costs the direct payment becomes more than 100 per cent of net farm income. In that case non-production would be more profitable for many farmers unless a link between payments and production is maintained. The concept of a direct payment system for non-production would be seen as rural dole funded by Brussels and it would be very vulnerable in political and budgetary terms.

It should be noted the Santer proposals in the beef and dairy sectors have not advocated full decoupling. In terms of area payment, the link between the direct payments and livestock numbers is to be retained. Even where the link with production is to be maintained, cutting prices to below production cost equivalent will inevitably [977] result in a low cost, low output agriculture industry, with implications for the food processing, farm input and service sector of agriculture and the Irish economy. The value of net output of Irish agriculture to farm household incomes after costs were covered would be as low as 15 per cent by 2005.

The proposed 20 per cent cut in cereal prices has serious implications for grass based industry in Irish agriculture. Cheaper cereals would make grain based livestock and milk production more competitive than grass based production. The two major grass based areas would be put at a major disadvantage relative to our European counterparts. The proposed 30 per cent beef price cut and the proposed 20 per cent cereal price cut imply a rapid erosion of export refunds after June 2000.

In the context of World Trade Organisation planning, export refunds are likely to be high on the hit list where further support cuts are being negotiated. Ireland has a disproportionately high dependence on export refunds for beef and dairy products which means the adjustment process will be relatively short and more costly for this country.

The Santer proposals that member states introduce differentiation of direct payments has many worrying implications. This means the envelope of money would be provided for each sector in each member state. The national Governments would then decide the rate of payment per hectare or per animal and the individual ceiling on the payment per farmer. If governments interpret CAP direct payments as import supports then frontloading would be likely with serious implications. This has already happened in the context of headage payments over the past couple of years which is part of the problem. The possibility is that the social agenda would supersede the long-term commercial agenda. The differentiation proposal would also result in the distortion of competition between farmers in different member states. The social agenda should not be forgotten, but it needs to be supported.

In the longer term differentiation could be the first step towards rationalisation of the funding of CAP direct payments. The accompanying measures are already on a co-financing basis. It is conceivable that wealthier member states, in pursuit of their own rural policy agendas, could seek to supplement the CAP direct payments from national budget resources, the consequences of which for Irish farmers are self evident. The thrust of EU agricultural policy, including lower product prices, direct payments and targeted environmental measures will impact directly on commercial farmers.

The Santer agenda gives formal recognition to protection of the environment as a key objective. Clearly, there is significant political support in the EU to link agricultural policy with environmental protection. As the proportion of farm income dependent on direct payments increases, the likelihood [978] of cross compliance with environmental standards will increase. While the role of agriculture in protecting and enhancing the environment is very important, EU negotiators in the World Trade Organisation must ensure that environment related constraints imposed on EU farmers are fully recognised.

In his speech the Minister said:

The CAP has already been subject to extensive reform and that process of reform 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 be 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 are preserved, the interests of member states are taken into account in a balanced way and, above all, the incomes of farmers and the viability of rural communities are fully protected.

Having examined the Santer proposals and witnessed what has happened to agriculture and to rural Ireland for the last 25 years, I believe it is time we had a new debate on a land policy with structures which would maintain what the Minister referred to in his speech. We must be serious in doing this, otherwise, harkening back to the Mansholt plan of the late 1960s, we will continue in the old way of the industrial nations of Europe which is not to establish and protect as many farmers as possible on the land but to have as few as possible, all carrying out commercial farming. This was not what the Treaty of Rome set out to establish. It recognised the role of rural people in the countryside and the CAP was a social policy which set out to achieve a number of objectives, namely, to ensure Europe would never again be dependent on food imports and to protect a rural based economy and the farmers who operate within it.

The MacSharry/Walsh reforms served Ireland well, but we have arrived at the stage where we need a full discussion on a new land policy which will cater for the needs of the people into the next millennium and beyond. Whether talking about quotas in dairying or any other sector of farming, the production of food will not feed the world in 2050 by which time the population will have increased by 10 billion people. This is what we are facing and the EU policies we are pursuing will not feed these people.

We are also losing markets as a consequence of quotas. Quotas may have served individual farmers well, but have they served Ireland well? Cutbacks in quotas mean cutbacks in world markets which are being supplied by other countries. Nothing in the Santer proposals will control the transfer of food and food products from Australia and New Zealand which will result in the supplanting and taking over of our markets. This is because industrial Europe is the driving force.

Farming is a business concerned with producing [979] food and an income for the individual. We have seen food used as a weapon in war. Why, in so-called times of surplus, is there starvation? Are our political markets, in a European or world context, so driven by other factors that we can control and limit food production and by the same token let millions of people starve? It is man's inhumanity to man.

If we are to have a new debate on a new direction and a new land policy which will help rural based communities, we must leave exotic ideas to one side. The family who can make a living from 20,000 or 30,000 gallons of milk should be allowed do so. The policies we have been pursuing have put the squeeze on such people. We can talk about afforestation and many aspects of rural life, but until we have the will to achieve for the maximum number of families on the land we will not have such a debate.

Let us have a debate on land use, how it relates to people and how we are controlling their livelihoods.

Mr. Chambers: I welcome the opportunity to contribute to this debate on agriculture because of its great importance to the people, including those in the west, and the national economy. I have been involved in agriculture for many years and have noticed the changes which have taken place, including a huge decline in the number of small farmers, particularly in the west. I remember when parishes could be divided and it was possible to see where the maximum was being produced from the land and the work done by young farmers and the interest they had taken in their work. There were opportunities for young farmers to increase production, maintain a livelihood and remain on the land. There has been a huge decline, particularly in the last ten years since elderly farmers have sold their quotas. Young people are not interested in small farms. In the past, small farms, together with co-operatives, played a very important part in the production of milk and exports for this country.

These are changing times; other countries are beginning to increase their production. Consumers are very conscious of the quality and cost of produce. One need only look around to see the change in people's eating habits; this applies throughout the world. There has been a substantial reduction in the consumption of dairy products. The level of beef consumption has also decreased, especially following the worldwide incidences of BSE. BSE frightened many people, although there has been some improvement recently in the level of beef consumption.

On the one hand, we speak about increasing productivity and financing that increase and, on the other, we speak about developing the industry. There are many lessons to be learned. Our produce must be of the highest quality and must be properly sourced. It must stand up as food which people wish to buy and consume.

[980] I recognise the strength of the Santer proposals in relation to the proposed reductions in the financing of beef for export and beef for subsidisation and the reduction of quotas and supports for the dairy sector. That will put a great deal of pressure on the Government in its negotiations and a very strong battle will win the war in achieving agreement on this matter in the European context and in the context of world trade and the GATT proposals. The principle of the reductions, if adjusted in a reasonable and fair way to Irish farmers and the Irish economy, seems rational and sensible. One cannot indefinitely support the production of food at a price which is not saleable, that can only be achieved by amassing mountains of butter, beef and so on. The people who paid for the type of agriculture which prevailed in the past will not do so any longer. We must adjust and, at the same time, we must introduce other support measures which will accommodate the changes.

I welcome the setting up of the four committees to support the negotiations which are taking place at Government level. Will Leader programmes come under the new regional strategy groupings proposed for local authority level or will they still retain their position, within the agricultural framework, of playing a very important part in rural development? It is expected that, as change occurs in the area of farming, there will be a reduction of 21,000 in the number of farmers in the west of Ireland. In view of these changes, there is a serious need for the Government to address the issue of rural decline. I believe that this is the right time to address that issue. Cohesive policies must be drawn up in this area by all of the appropriate development agencies, including local authorities. Whatever action is planned or taken now will lay the foundations for the future of rural Ireland.

Proposed plans or rural development programmes should aim to develop existing natural resources to sustain jobs on a long-term basis. In the long term, many small farms will not be able to sustain families without farmers having some other form of part-time employment. The Government should address this through an overall policy of utilising the natural resources which exist in abundance in many Irish counties; it should make cohesive plans in order that we can maintain economic populations, villages, churches and schools. Given the present wealth of the economy, action must be taken in this area. I invite the Minister to come to the west for a day's seminar on proposals to address the issue of rural decline, which would encompass rural development and farming.

Agriculture is the backbone and mainstay of the Irish economy and affects a great number of people. I believe the Charter of Rights in relation to payments to farmers should be fully implemented. It does not do the Minister or anyone else any favours if we fail to deliver on that; we are fundamentally obliged to do so. I am [981] aware that there are certain difficulties to be overcome but we should be able to deliver on our promises. Any outstanding payments should be dealt with, even if it is necessary to extend the rules to put things on a proper footing for the future. People who are entitled to payment should be paid.

I support the Government and the Minister for Agriculture and Food. I wish the Minister well in carrying out his tasks in relation to rural development in conjunction with the Santer proposals. I hope the Irish economy continues to do well particularly in the area of agriculture.

Mr. B. Ryan: There is an astonishing national consensus in this country that the CAP and the form in which it operates is a good thing and our prime national objective seems to be to minimise changes which would undermine it. There has been an ongoing debate on competitiveness in this country for the past 15 years, yet we force all workers to pay food prices well in excess of the world average. It must be a profoundly wasteful way of looking after the interests of a declining proportion of our population by imposing an anti-competitive cost on every member of society.

If the ESB, Bord Gáis or any other body increase prices artificially, we denounce them as being an impediment to competitiveness but in the next breath, and virtually unanimously, we support uncompetitive food prices. I would love to sustain thousands of jobs in the ESB or Telecom but the price to be paid for that would be expensive electricity and telecommunications. The price would be expensive electricity. I would like to support thousands more jobs in Telecom Éireann, but the price would be expensive telecommunications charges. I would like to support thousands of people in different areas, because keeping people in jobs holds communities together. I would like a viable post office in every town in Ireland, but that would make postal charges prohibitively expensive. I have never understood the logic that holds we must minimise costs in energy, transport and other sectors, but that we must sustain incomes in agriculture no matter what the cost to national competitiveness.

This economic logic must be addressed. I am a committed believer in the interventionist State and in the State's role in economic development and the protection of those who are economically vulnerable. However, it is intriguing that those who believe in free market competition in every other sector defend restrictive practices, anti-competitive pricing, price fixing, cartels, import protection and anti-free trade positions when it comes to agriculture. Let us have some economic logic for once.

My position justifies the sustaining of farm incomes, because I believe in the State's role in doing so. However, I also believe it is wrong to kick 1,200 people out of jobs in Waterford-Avonmore to make farmer shareholders richer than they are already. I do not see the logic in [982] demanding that the EU fund almost 50 per cent of farmers' incomes for no economic activity. Most of that money goes to farmers who are already rich, not to the 20 per cent of farmers who have negative incomes, the 20 per cent of farmers who earn £5,000 per year or the 20 per cent who earn between £5,000 to £10,000 per year. Most EU funding goes to those in the middle earning bracket or to farmers earning £20,000 or more. The 20 per cent of farmers who are well off are getting most of the EU funds. I see no logic in that and have never understood it. I believe passionately in sustaining the incomes of small vulnerable farmers in the same way that I believe in sustaining the incomes of everybody in society who is badly off. However, something done in the name of sustaining small family farms has made 20 per cent of those in agriculture grotesquely rich at the expense of food prices for ordinary families and the national interest. That seems ridiculous. It is time we stopped saying our job is to defend the Common Agricultural Policy and time we said our job is to defend those in agriculture who need defending. Those who speak loudest do not need defending; they have a vested interest in sustaining handouts to themselves to provide an income which is better than that of ordinary working people.