COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 16 Nov 2006

Chapter 10.2 — Staff Savings.

Mr. T. Moran (Secretary General, Department of Agriculture and Food) called and examined.

Chairman

Mr. Moran and the officials from the Departments of Agriculture and Food and Finance are welcome. Witnesses should be aware that they do not enjoy absolute privilege. Their attention and that of members is drawn to the fact that, as and from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act 1997 grants certain rights to persons identified in the course of the committee's proceedings. These rights include the right to give evidence; the right to produce and send documents to the committee; the right to appear before the committee, either in person or through a representative; the right to make a written or oral submission; the right to request the committee to direct the attendance of witnesses and the production of documents; and the right to cross-examine witnesses. For the most part, these rights may be exercised only with the consent of the committee. Persons invited before the committee are made aware of these rights and any person identified in the course of proceedings who is not present may have to be made aware of them and provided with a transcript of the relevant part of the committee's proceedings, if the committee considers it appropriate in the interests of justice.

Notwithstanding this provision in the legislation, I remind members of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official by name or in such a way as to make him or her identifiable. They are also reminded of the provisions of Standing Order 156 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government, or the merits of the objectives of such policy or policies.

Relevant correspondence includes documentation relating to the provision of a temporary premises for the Department's district veterinary office in Drumshanbo, County Leitrim. I ask Mr. Moran to introduce his officials.

Mr. Tom Moran

I am accompanied by Mr. John Fox who has responsibility for the single payment scheme and agri-environmental policy; Mr. John Gillespie, head of personnel and human resources; Mr. Aidan O'Driscoll, assistant secretary with responsibility for financial controls and audits; Mr. Denis Byrne who has responsibility for forestry and on-farm investments; and Mr. Brendan Gleeson, principal officer in the finance division. Mr. John Thompson and Mr. David Denny are principal officers in the Department of Finance.

Chairman

Chapters 10.1 and 10.2 of the annual report of the Comptroller and Auditor General read:

10.1 Single Payment System

Background

The Single Payment System (SPS) was introduced in 2005 as part of the new measures agreed to reform the Common Agricultural Policy. It changed radically the basis on which payments are made to farmers by decoupling payment and production and consolidating a range of scheme-based payments into one single payment. It also required the development of a range of new business processes by the Department of Agriculture and Food (the Department) and significant personnel and organisational changes.

With effect from 1 January 2005 the SPS replaced various cattle, sheep and arable aid support schemes. Most schemes were fully decoupled from production with effect from 1 January 2005. The exceptions were dairy premium introduced in 2004 and fully decoupled since 31 March 2005, and the dried fodder scheme, which has been partially decoupled (50%) to date.

In view of the radical changes involved in the introduction of the SPS my staff undertook a high level review of the processes and procedures adopted by the Department to manage the new environment.

Implementation of the SPS

The regulatory framework governing the SPS is EU Regulation 1782/2003. In addition EU Regulation 795/2004 lays down the detailed rules for the implementation of 1782/2003 while EU Regulation 796/2004 details the rules for the implementation of cross compliance, modulation and the integrated administration and control system provided for in 1782/2003.

There is no national legislation implementing the SPS. It has been implemented by way of Ministerial Decision, as were the schemes it has replaced.

The EU regulations gave countries a choice of implementing the new system between 2005 and 2007 and of initially opting for full or partial decoupling. Ireland was the first country to opt for full decoupling and opted, per Government decision, to begin issuing SPS payments from 1 December 2005, the earliest date allowed.

The SPS is applicable to farmers who actively farmed during all or any of the three reference years — 2000 to 2002 — and who were paid livestock premium and//or arable aid in one or more of those years and who will farm, or whose successors will farm, in 2005.

The Department, in its role as Paying Agency on behalf of the EU, has the same responsibilities for administration and for exercising financial control, in regard to the SPS, as it had for the previous schemes.

The Department had developed and managed a sophisticated information and communications technology (ICT) environment over many years. The SPS required the calculation of each farmer's entitlement, based on the unique history of the farm over the reference period 2000-2002, and the processing of over 140,000 SPS applications for payment by December 2005. The Department had a relatively short period of time from the Government announcement in October 2003 in which to acquire the necessary ICT systems. It approached the task in a pragmatic way by the extension of some relevant existing IT contracts and by open tendering for other elements of the system. Total development costs to end 2005 were almost €5m with additional costs of approximately €2.7m expected in 2006 for support, maintenance and change requests.

National Reserve

A National Reserve was established in accordance with EU Regulation 1782/2003. This is a fund created to compensate farmers, by way of new entitlements or a top-up on existing entitlements, for disadvantages arising in their specific circumstances from the introduction of the SPS. The National Reserve can be financed by a deduction from entitlements of up to 3%. The actual deduction was applied at a rate of 1.82% and so a National Reserve of €22.7m was created. An amount equal to the value of unclaimed entitlements is also transferable to the Reserve. The Department estimates that some €5m will be credited to the National Reserve from entitlements that were not activated in 2005.

Defined categories of farmers are automatically entitled to apply for an allocation of entitlements from the Reserve. To date some €12.4m has been allocated to successful applicants under the 2005 National Reserve. Farmers who receive new entitlements from the Reserve may not sell, lease out or otherwise transfer (except in cases of inheritance or gift), any of the entitlements that they receive from the Reserve for a period of 5 years starting from the year of allocation.

Deductions and National Ceiling

Under the EU legislation governing the SPS, there is a national ceiling for the total value of entitlements for each of the years to 2012. Ireland's national payments ceiling for 2005 was initially €1,136m but was subsequently increased to €1,260m by Commission Regulation 118/2005 to take account of the deferred inclusion of the Dairy Premium scheme in the SPS in 2005. Under the regulation, this ceiling cannot be exceeded and, if necessary, a linear reduction must be applied to entitlements to ensure compliance. In the event the sum of entitlements established for farmers exceeded the ceiling by some 1.18% and it was necessary to apply a linear reduction amounting to some €15.1m.

Entitlements are also reduced for modulation — a process whereby funds are diverted from the SPS to rural development measures. The modulation reduction in 2005 was 3% and this will be increased to 4% in 2006 and 5% from 2007 onwards. A refund of the modulation reduction applied to the first €5,000 of each farmer's entitlement will be issued in 2006 as provided for in the regulation. In practice this will amount to a maximum of €150 per farmer payable in 2006.

I asked the Accounting Officer how the Department would ensure that the National Ceiling for 2005 was not exceeded in light of the payments made to date, the deductions made for the National Reserve and modulation payments yet to be made in respect of applications not yet processed.

In reply he informed me that, as the National Ceiling is €1,260m and the reduction for the National Reserve was €22.7m, the amount available for payments in respect of 2005 was therefore €1,237.3m. The total amount paid to June 2006 (excluding payments from the National Reserve) was €1,160.3m, net of modulation at 3%. The total spend to date (including modulation payments of €34.7m) is therefore €1,195m.

He stated that the Department was satisfied that the payments made under the 2005 SPS would not exceed the National Ceiling because of the preventative action taken and various controls implemented as part of the payment process.

2005 SPS Payments

The SPS entitlement is calculated using the average number of livestock (hectares in the case of arable aid schemes) on which payment was made under each scheme in the reference years 2000 to 2002, multiplied by the 2002 payment rate for that scheme.

In the course of my examination of the new system I carried out a test check of the calculation of entitlements and their payment. This proved satisfactory.

Some 118,000 payments were made in December 2005 totalling approximately €1,058,6m (net of 3% National Reserve and 3% modulation reductions). All applications processed for payment in December 2005 were paid. However, approximately 10,000 farmers received no payment then as their applications had not been finalised. At the time of audit examination this number had been reduced to approximately 3,000.

The Accounting Officer informed me that 8,565 payments amounting to €85.7m in respect of 2005, excluding payments out of the National Reserve, were made in the period January to June 2006. A further €27.4m of supplementary payments, including National Reserve payments, was paid to 10,396 farmers in the same period. He also informed me that, at the end of June 2006, there were approximately 900 applicants, under the 2005 Single Payment Scheme, SPS, who had not been paid. A small number of other applicants would also become eligible following the processing of their application to transfer entitlements to them.

In the course of my examination I noted that a reconciliation had not been carried out between the total payments recorded on the SPS system in December 2005 and the SPS payments shown in the SAP accounting system. The Accounting Officer has informed me that the reconciliation has since been completed.

Force Majeure

Farmers who felt that their production was adversely affected by exceptional circumstances during some or all of the reference period (2000-2002) could claim force majeure. If the claim was accepted, the years in which production was adversely affected were excluded from the reference years in calculating entitlements. Where it was accepted that such circumstances arose during all of the reference years, the Department could use the period 1997-1999 as an alternative reference period. Examples of force majeure would be death or long-term incapacity of a farmer.

The European Commission conducted an examination in 2005 of force majeure claims and in their findings commented that the Irish authorities, in examining such cases, did not fix clear percentages to measure dips in production and recommended the introduction of a coherence test to ensure that all claimants were treated in the same way. The Commission's opinion resulting from their examination was that the Department might not have fully complied with the regulations.

In response, the Department stated that the objectives of article 40 of 1782/2003, the article dealing with force majeure, would not have been met if it were decided to fix clear percentages to measure reduction in production. It also stated that in every single application the circumstances put forward by the applicant were carefully examined to determine whether or not such circumstances satisfied the criteria for force majeure/exceptional circumstances. This was done by insisting on full documentary evidence such as death certificates or medical evidence. Having satisfied itself that the circumstances put forward, whether occurring during or before the reference period, could give rise to a dip in production, the Department examined each case to determine if, in fact, a dip in production actually occurred in one or more of the reference years. Departmental databases allowed for the examination of the patterns of production. In conclusion, it was stated that the Department was satisfied that its implementation of the article was in accordance with the provisions of that article and was the most equitable way of dealing with applications.

In 2005 the overall number of force majeure applications was 17,592. Of these 4,266 (including those allowed at appeal, etc) were accepted for payment and the number rejected was 13,326. The total paid on the 4,266 cases was €51.9m and the force majeure element of this sum was €8.5m.

Appeals Committee

An Appeals Committee was established by the Minister for Agriculture and Food in February 2004 to review the cases of farmers who were not satisfied with the Department's decisions in relation to their SPS entitlements.

Up to June 2006, a total of 4,943 appeals were considered. 509 appeals were upheld, 4,287 were not, 44 were deemed to be invalid and 103 had not been finalised. Applicants in 64 cases not upheld have complained to the Office of the Ombudsman. Following review, the Department has changed decisions in eight of these cases, often in light of further information.

Since March 2006, the Appeals Committee is also considering appeals in relation to the allocation of entitlements from the National Reserve. Some 900 such appeals have been lodged with the Appeals Committee but, as at the end of June 2006, no decisions have yet been made by the Committee.

Cross Compliance

Under cross compliance requirements, a farmer receiving an SPS payment must implement the various Statutory Management Requirements (SMRs) set down in EU legislation on the environment, food safety, animal health and welfare and plant health and must maintain the farm in good agricultural and environmental condition (GAEC). Seven cross compliance SMRs were introduced in 2005 together with the GAEC requirements for Ireland. A further eight SMRs, including the Nitrates Directive, were implemented in Ireland in 2006 while a further three are to be introduced with effect from 1 January 2007.

For farmers selected for inspection, there are two types of checks carried out for the purpose of implementing the SPS — eligibility checks and cross compliance checks. Eligibility checks verify the accuracy of areas being farmed and claimed for. It is a requirement that all eligibility checks are completed prior to payment. There are two types of inspections — ground (on-site) and remote sensing by satellite. It is an EU requirement that eligibility checks be carried out on 5% of farmers applying for the SPS.

A Commission audit of cross compliance was carried out during 2005 which raised a number of issues on the method used to select farms for inspections and the level of sanctions imposed on non-compliant farmers. The Commission auditors had further comments on weightings applied to the cases of non-compliance, application of sanctions and tables and instructions used for inspecting various SMRs.

A number of the audit comments were accepted by the Department in January 2006 and, as a consequence, some changes have been made. I enquired what implications these had for the number of cross compliance inspections required to be carried out and the number of inspection staff. The Accounting Officer informed me that the inspection visits are integrated with eligibility inspections with a view to ensuring, as far as possible, that only one visit was made to each farm. In this context, inspections under the Disadvantaged Areas' Compensatory Allowance scheme were also integrated with the eligibility and cross-compliance inspections under the SPS. The consequence of the introduction of the revised risk analysis model was that, while the number of farm visits will be reduced by 2,000 visits, the time spent on each farm will be significantly increased as inspection report forms will have to be completed in respect of each SMR necessitating an inspection of the total farm by the inspection staff.

Conclusions

The introduction of the SPS marks the single biggest change in the operation of the Common Agricultural Policy since its inception over 30 years ago. The Department faced major challenges in determining farmers' entitlements under the new system and making, what are in effect, key income support payments to the individuals concerned by the December 2005 deadline. This had to be done in accordance with complex EU regulations and subject to rigorous EU scrutiny. The evidence available so far suggests that the Department planned its approach to these tasks in a strategic manner and implemented them in a pragmatic and generally satisfactory way.

10.2 Staff Savings

It was anticipated at an early stage that the introduction of the SPS would lead to significant staff savings in the Department. The savings were expected to arise, as the full decoupling of farm support payments from production and the associated rationalisation of farm income support schemes would require less administrative effort. It was also anticipated that the staff savings would be partly offset by an increased level of controls linked to the introduction of cross compliance under the SPS.

Correspondence with the Department of Finance in April 2005 indicated that the Department felt it would be able to operate with some 400 less staff. The breakdown of the 400 was

250 local office staff

100 staff from the Department's office in Castlebar

50 staff from the area aid division in Dublin.

It was noted that, as of April 2006, local office staff numbers had been reduced by 152. This was achieved through 35 internal transfers within the Department and the departure of 117 staff from the Department — mainly through transfer to other Government departments, retirements and career breaks. It was also noted that 56 staff from the Castlebar office had transferred to the Department of Justice (Garda Information Services Centre). As it was expected that area aid staff would be required to administer SPS for the remainder of 2006, no reductions had been made in this area.

In September 2005 the Department commenced a review of District Veterinary Office (DVO) staffing levels. The review was carried out in the context of falling disease levels and efficiencies arising from the introduction of the new Animal Health Computer System (AHCS). The review report, issued in March 2006, found that some 115 less staff would be required in the local DVOs.

It was therefore estimated that the Department could make total staff savings of 515 in the relevant areas. As actual transfers out of the Department to April 2006 were 173, savings yet to be made at that stage amounted to 342.

I asked the Accounting Officer

How many staff had worked on schemes replaced by the SPS?

What measures were taken by the Department to ensure that these staff were redeployed as quickly as possible? In the meantime what measures had the Department taken to ensure that all of these staff were gainfully employed?

What difficulties had been experienced by the Department in relocating staff where alternative local relocation opportunities were not available and how had these been overcome?

Had the Department experienced particular difficulties in relocating or redeploying technical staff such as veterinary staff and, if so, how did the Department propose to address the difficulties?

When was it expected that the anticipated staff savings of 115 in the DVOs would be achieved?

The Accounting Officer informed me that, in all, some 400 administrative, 185 technical agricultural and 12 inspectorate staff worked on schemes replaced by the SPS. He stated that the Department had worked closely with the Department of Finance, other Departments and also with staff associations with a view to redeploying surplus staff. Apart from the 50 administrative staff in the Area Aid unit, who were still an integral part of the SPS operation and not yet available for redeployment, approximately 250 of the balance of the 350 administrative staff had been accounted for, by the end of June 2006, through redeployment, natural wastage, promotion etc.

He further stated that his Department, with the assistance of the Department of Finance, had facilitated the possibility of temporary blocks of work being transferred from other Departments to Departmental locations where alternative local relocation opportunities were not available. The Department of the Environment, for example, had availed of the surplus Departmental staff in Ballybay. In other offices, surplus staff, because of their experience with the previous schemes, were working on certain measures relating to the continuing implementation of the SPS.

He informed me that it was not yet clear how many technical/inspectorate staff would be surplus, if any. While the number of annual inspections had decreased, the complexity had increased, particularly with the introduction of a range of cross compliance and environmental measures. To date, the Department had concentrated on the redeployment of surplus administrative staff but intended to review the situation regarding technical/inspectorate staff in the near future.

Finally he stated that the rate at which staff could be redeployed from DVOs was dependent on the number of vacancies arising in other Departments or offices in the same geographical location.

Conclusions

Issues associated with re-organisation and re-deployment of staff affected by the introduction of the SPS might fairly be described as work in progress. The Accounting Officer makes it clear that these issues must be advanced in conjunction with the Department of Finance, staff representatives and indeed other Departments and agencies who may have a need for staff in locations where Department of Agriculture and Food staff are no longer required as a result of the introduction of the SPS. While this is no doubt the case, there remains a pressing need to ensure that professional, technical and administrative staff formerly working on schemes now replaced by the SPS are deployed in the most efficient and effective way possible in the new environment.

Mr. John Purcell

As I have no particular observation to make on the Vote, I will turn to chapter 10.1 on the introduction of the single payment system in 2005 which fundamentally changed the European Union's methods of financially supporting farmers by replacing a raft of schemes with one providing for one payment for land management, thereby decoupling payment from production. The annual single payment is calculated on the basis of subsidies paid during all or any of the so-called reference years 2000 to 2002, with special arrangements for farmers who would have been financially disadvantaged by exceptional circumstances such as illness during the period in question.

Clearly, the implementation of the system presented a major challenge to the Department and required the development of a range of new business processes and the management of significant organisational change. In view of the scale of expenditure associated with the new system, involving as it does annual payments amounting to €1.2 billion to 130,000 farmers, I decided that we should examine the Department's performance in managing the changeover to the new system in order that we would be in a position to provide assurance that it was working properly. I am happy to report that we concluded, all things considered, that the Department had carried out the task very well and had managed the risks successfully. On the basis of our test checking, the procedures put in place have resulted in the accurate calculation of entitlements and timely payments to the vast majority of farmers. We will continue our work in this area during the current year, taking into account the checks conducted by the various other parties involved in the control structure, namely, the Department's strong internal audit unit, the accounting firm which acts as the certifying body for FEOGA transactions, the European Commission and our European counterpart, the European Court of Auditors.

The success of the changeover was due in part to the Department's investment in sophisticated information technology in recent years which left it in a good position to reap the benefits. It adopted a pragmatic approach to managing the development of the systems underpinning the new payment scheme by building on its existing information technology infrastructure. Important changes accompanied the implementation of the new scheme. The setting of a national ceiling for the total value of entitlements for each of the years to 2012, the establishment of a national reserve to benefit certain categories of farmers, the operation of the force majeure procedure and the requirement for cross-compliance checks to ensure environmental considerations were respected are all outlined in greater detail in the chapter.

With regard to chapter 10.2, one of the beneficial side effects of the single payment system is that the new scheme requires less administration in staffing terms than the range of schemes it replaced. Initial estimates put staff savings at 400 once the system was up and running, although it was anticipated that the potential savings would be partly offset by the requirement for an increased level of control linked to the introduction of cross-compliance checks. Elsewhere in the Department other opportunities for staff savings were identified as a result of falling animal disease levels, the introduction of new computer systems and the efficiency gains accruing from them. In that regard, it was reckoned that 115 fewer staff would be required in local district veterinary offices. Taken together, these figures represent an approximate 12% reduction in overall staff levels in whole-time equivalent terms.

Managing such a substantial reduction within the context of implementing the Government's proposals on decentralisation is quite a task, particularly when one takes account of the need for dialogue and agreement with staff representatives and co-ordination with other Departments and agencies. That, in turn gives rise to concerns that there could be delays in redeploying staff, with the consequent likelihood of staff being underemployed or not gainfully employed for periods of time. I recognise that it is virtually impossible to avoid incurring some excess expenditure of this type but it is important that arrangements are put in place to keep the excess to a minimum. The problem is particularly acute in the case of surplus technical staff who may not be as easy to accommodate in suitable alternative positions as administrative staff. A further difficulty arises from a geographical imbalance between business needs and staff resources, where there can be surplus staff in one location but a shortage of staff elsewhere which has occasionally required the hiring of additional temporary staff. A specific problem also arises in the case of district veterinary offices, where the rate at which staff can be redeployed is dependent on the number of vacancies arising in other Departments or offices in the same geographical location.

As I note in the chapter, the reorganisation and redeployment of staff from the Department remains a work in progress. In the light of the Department's previous experience in dealing with staffing issues in the wake of the dissolution of the Dublin and Cork District Milk Boards and the Land Commission, it is imperative that timely decisions are made to ensure any nugatory payroll costs will be kept to a minimum.

Mr. Moran

I thank the Comptroller and Auditor General for his presentation of the report on the Department of Agriculture and Food for 2005 and the Chairman and members of the committee for giving me the opportunity to address the issues raised.

The appropriation accounts for 2005 show gross Voted expenditure of €1.356 billion, or 94% of the gross Estimate, by the Department of Agriculture and Food. Most of the Department's expenditure relates to measures dependent on variables such as market conditions and animal disease levels or demand-led measures. The savings made in 2005 arose in areas such as competitive research measures, animal health, early retirement and installation aid, on-farm investment and forestry. There was also a technical Supplementary Estimate in 2005 arising from the need to create a new subhead for the payment of approximately €8.9 million in national contributions to farmers who lost income as a result of an overshoot in the national quota for special beef premium in 2004. This additional funding was supplemented by the European Commission and resulted in a package worth €17.5 million for affected farmers. The Supplementary Estimate also made provision for an additional grant-in-aid of €800,000 to Bord Bia under subhead K to finance an accelerated beef promotion campaign and market initiatives in the enlarged EU and Asian markets. The cost of these two measures was met by transfers from the animal health and market supports areas.

Apart from Voted national and co-funded expenditure, the Department is responsible as an accredited paying agency for the European Commission for the administration of wholly EU funded FEOGA guarantee funds which finance a range of supports critical to the agrifood sector in Ireland, including market supports such as export refunds and market intervention, production aid for dairy products and arable crops, aid for producer groups in the fruit and vegetables sector and direct payments to farmers. In 2005 expenditure by the Department on these wholly EU funded measures amounted to €1.84 billion. The single farm payment, the subject of chapter 10.1 of the Comptroller and Auditor General's report, was by far the largest single component of this expenditure. Payments under the scheme commenced on 1 December 2005, the earliest date possible under the relevant regulations. By 31 December 2005, approximately €1.058 billion had been paid to farmers. To date, a total of €1.193 billion has been paid, when account is taken of modulated money refunded in respect of the first €5,000 of each farmer's payment.

The decoupled single farm payment was part of a fundamental reform of the Common Agricultural Policy agreed by member states in 2003. The reform was designed to prepare European farmers for an increasingly competitive and global marketplace and to address consumer concerns through an increased focus on food safety, animal health and welfare and environmental sustainability.

The single farm payment encapsulates all these aims. The decoupling of the payment from production frees farmers to produce for the market rather than encouraging farming for subsidies. Irish farmers were the first in the EU to embrace this concept fully. In addition, the requirement to meet a range of cross-compliance conditions links the payments to a commitment to farming in a manner which is environmentally sustainable and consumer orientated.

In Ireland, the scheme was implemented in consultation with stakeholders, including farm bodies and the European Commission. Since its inception, it has been audited, not only by the Comptroller and Auditor General, but several times by the European Commission and by the European Court of Auditors. Where audit recommendations have been made, we have been careful to take account of them in the continuing evolution of the scheme.

It is inevitable that a scheme of this size, complexity and value will be the subject of continuing audit scrutiny from all these bodies. Indeed the Department of Agriculture and Food generally was subject to 2,792 person days of audit in 2005, including 480 from the Comptroller and Auditor General, 444 from the certifying body for the EU guarantee account, 40 from the European Court of Auditors, 36 from the European Commission and 1,792 from its internal audit unit.

This is as it should be and I have no doubt that over the coming years, in the case of the single payment, as with other schemes, there will be further adjustments, subject to the constraints within the regulations, in response to audit recommendations and as a result of operational experience.

The report of the Comptroller and Auditor General concludes: "The evidence available so far suggests that the Department planned its approach to the single payment in a strategic manner, and implemented it in a pragmatic and generally satisfactory way". We are committed to improving our service continually and I have no doubt there will be lessons to be learnt through experience of operating the scheme.

As the Comptroller and Auditor General has acknowledged, the Department faced major challenges in determining farmers' entitlements under the new system and making what are, in effect, key income support payments to the individuals concerned by the December 2005 target.

The extent of these challenges is illustrated by the difficult experience in the UK in respect of the same scheme. I am acutely aware, therefore, that there is no room for complacency in the administration of this scheme and in light of the continuing risks and challenges it presents.

On point 2 in chapter 10 of the Comptroller and Auditor General's report, which relates to staff savings, the report indicates it was anticipated at an early stage that the introduction of the single farm payment would result in significant staff savings in the Department. These savings arise primarily from the reduction in the number of schemes to be administered, the centralisation of the administration of the single farm payment in Portlaoise and continuing efficiencies as a result of the introduction of new computer systems. The single payment scheme as it stands in late 2006 has, however, required significantly more staffing resources than envisaged in early 2005 because of the volume and complexity of work related to the single payment, such as the operation of the national reserve, the transfer and trading of entitlements and the incorporation into the single payment of the new sugar regime.

The current level of 4,229 civil servants, in whole-time equivalent terms, is a reduction of 301 on the 4,530 employed by the Department in early 2005. Notwithstanding the pressures on staffing incurred in the operation of the single payment scheme, the Department is on track to achieve a reduction of 400 to the target level of 4,130 staff by the end of 2006 or early 2007. These staff reductions are being pursued in close co-operation with the Department of Finance and other Departments. Most of the staff reductions are achieved through the transfer of staff to suitable vacancies in other Departments. We have received excellent co-operation from other Departments in this process to date as exemplified by the transfer of 56 Castlebar staff to the Department of Justice, Equality and Law Reform and 34 to the Revenue Commissioners. Further progress will take the same format and will depend upon suitable vacancies being identified.

A number of studies have been carried out detailing where savings arise, including a review of livestock offices, district veterinary offices, and the export refunds area. These identified savings have enabled the Department to initiate a vigorous programme of staff reduction while at the same time deploying resources to areas where there are significant demands for additional staff, including single payment scheme, information technology, forestry and rural development.

The overall staffing level of the Department will be kept under review in 2007, including an examination of the resources deployed on the single payment scheme and the associated cross-compliance inspection regime. In light of these and other reviews planned in, for example, the areas of information technology and on-farm investment, subsidies and storage, the Department will continue the process of adjusting the balance between resources available and the demands generated by its fast-changing business requirement and service delivery targets.

This process is not without significant challenges, however. These include the following: the geographical imbalance, from time to time, between business needs and staff resources in disparate locations in a Department as decentralised as the Department of Agriculture and Food; the need to ensure that exceptional work demands arising from changes in areas ranging from food safety to support services to the introduction of new programmes to support rural development and protect the environment and water resources continue to be met; the need to ensure business continuity while managing a major decentralisation programme which will involve the physical relocation of almost 2,000 staff in the period to 2009; and the continuing, but diminishing, need to manage residual payments under legacy schemes, in particular the nine or so direct payment schemes which have been phased out or modified as a result of the introduction of the single payment scheme.

I am also conscious of the overriding imperative of maintaining a quality service to the public through this very significant change programme. To do this we need to preserve staff morale and motivation, avoid any loss of corporate identity or core corporate knowledge and maintain the Department's clear strategic focus. Indeed I acknowledge the dedication and commitment of Department of Agriculture and Food staff at all levels, which has been a key component of the success to date in managing dramatic change over recent years.

I am now happy to take any questions the members of the committee may have.

Chairman

May we publish Mr. Moran's statement?

Mr. Moran

Yes.

Chairman

Before I call on Deputy Curran, can Mr. Moran deal with the issue of the premises in Drumshanbo and the associated correspondence from Councillor McGlynn? The committee has received correspondence from Mr. Moran on the subject but, for the purposes of the record, he might summarise it.

Mr. Moran

I would be delighted to. The correspondence related to the selection by the Department of temporary accommodation in Drum-shanbo to house our local office.

In October 2005 the Minister gave a commitment to use temporary accommodation in Drumshanbo pending the completion of permanent offices. Following receipt of sanction from the Department of Finance, the Office of Public Works, OPW, advertised for premises and received six offers. These were examined by the OPW, Department local staff and staff from accommodation division. It was agreed to reduce the list to two and the OPW consulted the two owners further. The OPW wrote to the Department on 10 May setting out the two offers and raising considerations relating to both. It pointed out that the difference between the respective outlays were not so significant as to point definitively to one premises as the one to pursue. As is normal practice in such cases, we consulted local staff and were left in no doubt that they would prefer to work in the chosen premises for operational purposes, largely related to issues of staff management and supervision of staff in an open plan area.

The OPW was informed of our Department's preference and the offices were fitted out to the Department's requirements and officially opened recently by the Minister. The office layout is most suitable for the Department's needs and both staff and our farmer clients have expressed satisfaction with the offices.

Chairman

Does any member wish to raise a question on this issue?

Deputy Curran

I welcome Mr. Moran. It is a good day to be here, as the Comptroller and Auditor General's report is very favourable. It was appropriate that a detailed review of the single farm payment was undertaken, as its introduction was a very substantial change. The comments, both in the report and made by the Comptroller and Auditor General today, would indicate that Mr. Moran and his Department implemented this very well. That said, I wish to ask one or two questions. It is not that I have found fault, but rather wish to look at where the Department is going.

Mr. Moran mentioned in his own report, with regard to the single payment system, that there is no room for complacency in the administration of the scheme and he addressed the continuing risks and challenges it presents. I would have presumed the bulk of the risks and the challenges are now behind the Department. The establishment of the scheme was undoubtedly the greater part of the task and it should be easier to manage from here on in. Is that correct, or have particular risks and challenges been identified?

Mr. Moran

I appreciate the positive comments. The single farm payment is a very challenging scheme, not only because of the large amount of money involved and its complexity. The Deputy is correct to a certain extent in that the establishment of the initial system was the initial blast-off, in which there is always significant risk. That is the reason I mentioned as an example the situation in the UK, for which I have great sympathy. Getting the IT system up and running and centralising the staff is a significant risk when moving from a large range of coupled schemes to this one.

I would differ from the view that it is a simple scheme from then on, simply a matter of pressing a button and issuing cheques. That is a misapprehension to some degree. For a start, the scheme has become more complex since its introduction. We are speaking about the management of entitlements, worth about €4 billion or €5 billion, and entitlements can be transferred. We must operate the national reserve and the force majeure situation. At a later stage we introduced decoupled direct payments into the dairy sector. Recently we had to add sugar beet farmers, a particularly complex matter given the nature of the sugar regime and way beet was grown. The money side involves issuing accurate payments in a way that is increasingly consumer-friendly. We hope to move to on-line applications. It is a risky area that requires a tight hand.

The other side, which is often not taken fully into account with public comment on the scheme, is cross-compliance. It is not, by any means, money for nothing or based on past achievement. In broad terms, the money is there because the European Union has indicated the CAP is shifting. In return for a range of public good provisions relating to food safety, the welfare environment, etc., there is a single farm payment. This must be controlled, checked, implemented and managed at farm level. The checks have become more complex, longer and more in-depth. They have greater effect on the payment because the volume of money is greater.

To shorten a long answer, it is a more simple scheme in concept, which should be easier to administer in the long term. Certain issues, such as those I mentioned, are not always taken into account.

Deputy Curran

I will tease out some of Mr. Moran's statements. The payment is not an automatic right for a farmer, and statutory requirements must be met to enable farmers to qualify. This relates to the area of cross-compliance. Is it correct that there are on-site inspections of approximately 5% of farms, resulting from either Department or EU rules?

Mr. Moran

The level of checks depends on the area. For example, a percentage applies to eligibility or whether a farmer has the area. There is a 5% check on the animal identification element. The percentage checked relates to specific areas.

Deputy Curran

Do the checks physically take place on the farms?

Mr. Moran

Yes.

Deputy Curran

I suppose the checks take place each time there are additional management requirements.

Mr. Moran

That is correct. Over the two years of the single farm payment so far, there has been a step-up in the level of cross-compliance requirements, which will continue. Another range will come in next year.

Deputy Curran

We had representatives from the Revenue Commissioners before us last week. Clearly, no matter who is being considered, there is always somebody who is not compliant for whatever reason. What are the sanctions for non-compliant farms?

Mr. Moran

The sanction depends on the level or nature of non-compliance. For example, it can range from a 100% disallowance of the single payment——

Deputy Curran

Has that happened?

Mr. Moran

It has in a very small number of cases. It is more likely to be in the lower level of a percentage reduction of the payment, where the infringement is of lesser importance or extent. For example, if one of our inspectors discovered an animal's tag to be missing it may not result in cross-compliant disallowance, depending on the size of the herd. If there was systematic or wilful departure from rules, there would be a higher scale of disallowance.

Deputy Curran

Without knowing the exact sanctions, what percentage of farms were non-compliant in one way or another of the total cross-compliance examinations carried out?

Mr. Moran

Taking 2005 as an example, of 6,700 files selected for inspection, 82% related to identification of animals. Some 20% were penalised for non-compliance. Some 491 were subject to a 1% penalty, 229 were penalised at 3%, 479 at 5%, four at 15% and 13 at 100%. The total amount withheld from farmers in 2005 was €329,000, or 0.029% of the envelope available to Ireland.

Deputy Curran

Those found to be non-compliant were examined, is that correct?

Mr. Moran

There is a 100% check on eligibility. Some of that is done remotely and some through on-farm visit. The rest of the cross-compliance checks are done through on-farm visit.

Deputy Curran

What percentage of farms receive an on-farm visit in any given year?

Mr. Moran

The figure has come down.

Deputy Curran

Is that because the examinations are integrated?

Mr. Moran

They have been integrated. The figure this year for in-depth, on-farm visits will be approximately 8,000 to 9,000.

Deputy Curran

How long does the in-depth, on-farm visit take?

Mr. Moran

The aim is to have it completed in one day where possible.

Deputy Curran

Before discussing the Vote, I wish to consider staff savings. Mr. Moran mentioned earlier that he hoped to be at the target level by the end of this year or early next year. Is the current surplus in general grades or technical grades?

Mr. Moran

It generally applies to administrative grades.

Deputy Curran

Is the geographical location presenting the greatest challenge in finding suitable alternatives?

Mr. Moran

It probably is the greatest challenge given the surpluses were spread across offices throughout the country. The challenge is to find locations elsewhere in the service for those that become available. There has been great co-operation from the Department of Finance and other Departments in this regard and we have been happy with the results. For example, between the Garda, the computer unit and Revenue, roughly 100 people have gone to Castlebar and it has worked extremely well. Similar exercises have been carried out elsewhere, in Ballybay, for example, with the Department of the Environment, Heritage and Local Government. It can be done, it can be managed and we are happy with how this has been achieved so far.

We will not have staff doing nothing and by moving people to other Departments, in conjunction with the Department of Finance, we have sent work to areas that needed to be tidied up. Regarding old coupled schemes, we have been able to send blocks of work to particular offices while addressing the issue of staff whose workload has lessened due to the single payment scheme. This has helped in tidying up old schemes, which had to be done.

Deputy Curran

I want to ask some general questions on the Vote. I do not come from a farming background but one or two things were of interest to me. Reference was made to the estimate exceeding the outturn, particularly with regard to subhead C on food safety and the notes refer to a reduction in levels of tuberculosis, bovine spongiform encephalopathy and so on. There has been great consumer interest in BSE in recent years. Where do we stand in terms of its eradication?

Mr. Moran

We are where we want to be on the issue because the number of cases has taken a sharp dip. So far this year there have been around 36 cases and last year this figure stood at around 67 which is down from a considerable peak. We are going in the right direction and are happy with the measures in place. One measure is to deal with the eradication of the disease and prevent it from returning and another, perhaps more important, is to triple-lock consumer risk even if the disease exists residually.

In terms of the age profiling of animals and random testing, the results are pointing in the right direction and the proof of this is the international confidence in the beef sector.

Deputy Curran

Are there any markets that still restrict the importation of Irish beef?

Mr. Moran

In the last five years a very significant shift has occurred in Irish beef exports. The ratio used to stand at 50:50 between EU and non-EU countries, and now 90% of beef exports go to EU countries. This is due to the very significant effort made in promoting Irish beef and confidence in our system of food safety. It also comes down to a deficit in EU terms.

Irish beef is still banned in areas around the Gulf, for example Saudi Arabia, which was an important market and this relates specifically to BSE. Those countries make no secret of the fact they will not import beef from countries with even a single case of BSE. This is not a view we share and we have been successful in changing that view in other countries.

Deputy Curran

The food safety issue is not a problem in most EU countries that buy from us.

Mr. Moran mentioned there have been 36 cases of BSE this year. Is the Department's goal to reduce this figure to zero in the coming years and entirely eradicate the disease?

Mr. Moran

Unlike many other diseases that might come back to the surface, technically a stage can be reached when BSE will be eradicated.

Deputy Curran

Regarding subhead G on the main Vote on early retirement, the outturn was significantly lower than the estimate. Does this suggest farmers are not taking early retirement or what is the underlying trend? What is the projection for the future on this issue?

Mr. Moran

In terms of the farm structure measures, installation aid may be on the way in and early retirement on the way out. The Deputy is correct in identifying a decrease in the numbers participating which probably reflects developments in rural Ireland and society generally. Farmers did not find the scheme sufficiently attractive to hand over their farms and a degree of uncertainty existed regarding the single payment scheme that was coming.

Farming has remained sufficiently attractive to keep many older people in the job for a range of reasons. However, one could frame this another way by suggesting the scheme was simply not sufficiently attractive. We have tried to address this because it is in everyone's interests that younger people are attracted to farming. This is why we have increased farm retirement scheme payments in the new rural development plan that is out for consultation currently and we have also removed some of the technicalities that might have acted as obstacles. Time will tell if what we have seen is a reflection of societal trends in rural Ireland because the age is quite low and the broad trend is for people to continue working longer.

Deputy Curran

I am sure some of my colleagues in rural constituencies will return to that issue. There is a note on page 230 of the accounts on extra receipts payable to the Exchequer regarding the purchase of lands by Kildare County Council for the Kildare bypass. I have no problem with this but the amount of money involved seems very small for 350 hectares, a substantial piece of land. How was this figure arrived at from an accounting point of view?

Mr. Moran

That question is fairly easily answered and I can see why it has been asked. The 352 hectares does not represent the totality of what was sold to Kildare County Council — 18.2 hectares were at issue and the balance was vested in the National Stud. The figure may not have been presented as clearly as it could have been in the accounts.

Deputy Curran

A note to that effect might be included in the accounts for the benefit of the layperson.

Deputy Hayes

I compliment the Department of Agriculture and Food on the manner in which the single farm payment scheme was implemented as it was a huge project. That is the soft side of my questioning taken care of and my comments from now may be of a different tone.

The force majeure application was for people who did not agree with the payments they received and 13,500 or 76% of such applications were rejected. Why was there such a high rejection rate? It appears to have been strictly implemented. I happen to be familiar with some of the cases in question and thought they were genuine. However, no change was made for them and I would like an explanation in this regard.

Mr. Moran

The concept of force majeure is set. It runs across all EU legislation. As the name suggests, it is to deal with exceptional situations that might arise during the course of an entitlement creation event. For example, during the reference period it might be demonstrated that something caused the single payment to be less than it should. We took the force majeure system very seriously and went through all cases systematically. We tried to be as fair as possible when establishing whether a case stood up. In other words, events such as deaths, or serious illness of farmers during the period in which they were building up the entitlement to the direct payment were in question.

A key point regarding such payments was that if one was overly liberal with one's interpretation of the force majeure rules, they could only come out of the payments to the non-force majeure people. It is a question of striking the correct balance in this regard. Moreover, it might not stand up under questioning at EU level. It is a two-edged sword. We thought and still think we were as fair as possible in this respect.

Deputy Hayes

Did the Department take diseases into account? There were three reference years and people might not have made applications for one or two of them. I know of cases in which people made no applications because they had no animals as the Department had forced them to clear out their herds. This was not allowed. Others may have had lower stock numbers or whatever, due to the Department's disease eradication schemes. Were such individuals not considered for force majeure?

Mr. Moran

We made full use of all documentary and computerised evidence available to us, as well as the case made by the applicant. For example, applicants might have been particularly badly affected by disease during one of the three reference years. In that case, they had the option of using the other two years to create the average, rather than using the year in which the disease brought down herd numbers and payments. This would have been taken into account.

Deputy Hayes

Payments were not cut back. Hence, that very high figure would not be accurate.

Mr. Moran

No.

Deputy Hayes

I refer to changes to the structure of the scheme's administration. The Department has many staff. A majority of applications for single farm payments will be identical every year and should not change. I estimate this would be true in 85% or more of cases. How many did change? Does Mr. Moran have the figures from 2005 to 2006 to hand? At some stage in the future, would it be more reasonable to have a simpler application, rather than being obliged to go through the process — as do most people — of employing Teagasc advisers, their own agricultural consultants or whatever? If there is no change from the previous year, why not use a simplified form that would state this? Can Mr. Moran envisage the possibility of such an application? It would cut back greatly on the existing bureaucracy. People's fears of issues such as cross-compliance pertain to the associated bureaucracy and red tape.

Earlier, Mr. Moran spoke to Deputy Curran regarding farm checks. Some of those cases only involved one figure, or a single digit on an ear tag number. Such cross-compliance issues are having serious effects on those who run farms. I ask Mr. Moran to comment on and respond to these questions.

Mr. Moran

The Deputy raised a number of specific issues, as well as a few general points. I will give the Deputy an example on the specific issue. Between this year and last year, there have been 20,000 cases in which the land area has changed. This gives an indication regarding that issue alone.

Deputy Hayes

Out of how many?

Mr. Moran

There are approximately 131,000 farmers. The figure is somewhat high.

Deputy Hayes

That is my point.

Mr. Moran

There are also other changes. However, the general point——

Deputy Hayes

To clarify, there were 20,000 changes out of the total number of 131,000 farmers.

Mr. Moran

Yes. This figure pertains to changes of land area.

Deputy Hayes

Once the land area is known, what other changes could there be?

Mr. Moran

It determines the eligibility of the payment to begin with, without taking into account the subsequent cross-compliance requirements. I take the Deputy's point in this regard and agree with the Deputy's overall approach. We have no difficulty in agreeing with the desire to make the system more simple, farmer-friendly and user-friendly in a broad sense. At EU level, the Department is driving a major move towards greater simplification of the entire single payment system. We are working with the Commissioner and are using bilateral pressure with other countries to try to so do. For example, we understand the next Presidency, that is, the German Presidency, will launch a major drive to simplify the system at EU level.

I will qualify this point. While the present system — with its required checks — remains in operation, we are obliged to ensure we do not put at risk the huge amounts of funds that come from the EU. No one would thank us for taking a risk that might lead to a disallowance of EU money. For as long as the EU requires such checks and controls, we have no option but to apply them. We do so in as transparent and clear a manner as possible. We are trying to induce the Commission to adapt the system to become more simple and I am quite hopeful that we will do so.

In particular, I am hopeful because we were first out of the traps as far as the decoupling system is concerned. While one gets great kudos at EU level for so doing, what also happens is that others do not realise the extent of the controls, or the extent of the huge edifice of what one could call bureaucracy. While I do not mean that in a pejorative sense, other member states may not have realised the extent to which such bureaucracy is attached to this system. The fact they are now coming to it and the Commission now realises this has resulted in a push at EU level to consider whether the system can be better shaped.

As the Deputy suggested, we can do much from one year to the next by building on the experience of previous years. For example, we take the point that many details will not change. In cases in which applications do not change, we will ensure that we make full use of that. We are limiting the amount a person must do to apply. Moreover, one of our information technology plans is to move to on-line applications in order to make it easy for a person with no changes to apply the next time around. We are building on the Deputy's point.

To summarise, we are pressing politically at EU level to develop a simpler system. In the meantime, we cannot take any risks or put any Exchequer money at risk. Within the confines of what is possible, we are moving towards the situation suggested by the Deputy.

Deputy Hayes

I welcome that sensible approach, which the farming community would also welcome. I cannot stress enough the fear of making mistakes with application forms, figures or anything that could throw one off track. Officials do not understand that fear.

Regarding outstanding payments from 2005 and 2006, what is the situation in respect of the former? Can the payments be resolved and how many people in the Department are working on the issue? Despite parliamentary questions and so on, a client of mine has not been looked after. I am not satisfied with how the Department has taken care of him, but I will speak on that at another time.

Mr. Moran

Several hundred farmers are awaiting approximately €4 million in total. The majority of farmers have received payments and, by definition, we are at the end of the main bulk of the payments, including to those who have had problems and so on. We are dealing with complex difficulties, such as questions of land ownership, disputes or transfers.

Given that the single payment comprises a large proportion of a farmer's income, particularly that of a small farmer, it is in everyone's interest to make it. Therefore, we are putting considerable effort into the matter and working closely with the farmers involved. For example, while people may say otherwise, we have visited those who have not made claims and encouraged them to send applications. It is in our interest to use the maximum amount of money available to us. Only a small number of payments are outstanding.

Deputy Hayes

From 2005.

Mr. Moran

Yes.

Deputy Hayes

What about 2006?

Mr. Moran

We have chosen to make advance payments. We brought the date forward from 1 December to 15 October, the earliest possible date. We received the Commission's approval to make 50% of the payments at that date as a cash flow exercise. To a large extent, we were successful in that we have reached 90% of the relevant figure. We are in line to repeat or, I hope, exceed last year's success. I imagine the latter to be the case.

Deputy Hayes

Does the Department have a special unit to deal with outstanding payments?

Mr. Moran

Yes.

Deputy Hayes

According to the Comptroller and Auditor General's notes, some €52,000 was paid in respect of the beef tribunal. Was this matter not wrapped up and the report finalised? Where is that money going and for how long will the issue continue?

Mr. Moran

It relates to the outstanding taxed costs that have come through the Chief State Solicitor's office and been decided by the taxing master for which we are liable. In 2005, we paid €52,000 and this year's costs amount to €147,000. I cannot say whether the issue is closed. I would like to be able to say, "That's it, we're finished", but there may be one or two matters in the pipeline. The costs amounting to €52,000 have been sanctioned and cleared.

Deputy Hayes

We do not know the total cost of the beef tribunal.

Mr. Moran

We do not have a total. While I may be wrong, the outstanding sum is not large. For example, the cost in respect of one individual in 2005 was €52,000.

Deputy Hayes

Will Mr. Moran explain where the costs arose?

Mr. Moran

The Department has no control over the timing of the flow of these costs. They become bills to the Department when they have been taxed and presented for payment, from which date there is a time limit on the payment. These costs, which are legal expenses incurred by individuals, were submitted to be ruled upon as legitimate costs associated with the tribunal.

Deputy Hayes

Is Mr. Moran saying that the matter is ongoing and people could appear with more bills in four, five or six years?

Mr. Moran

No. They are legal costs that arise for us to pay. We are paying bills that have been vetted and taxed and in respect of which we are legally required to act. Someone who has participated in the tribunal could not now decide to put together a list of costs and submit them to the system.

Deputy Hayes

Is the Department able to estimate the outstanding amount?

Mr. Moran

I am afraid we cannot. While I imagine there will not be a considerable number of payments after this year's figure of €147,000, it would be foolhardy of me to say there will be none. I agree with the Deputy. I would prefer for the matter to be out of the system sooner rather than later, but when we have an outstanding liability in terms of a legally incurred cost, we must pay it.

Chairman

Mr. Moran spoke about the simplification of the application process for single premium payments, SPS, and stated that there is a variation in the land holdings of approximately 20,000 applicants. In many cases, would the latter matter be as simple as a farmer selling a site or would land have been acquired for productive purposes?

Mr. Moran

It could be that simple, but it could involve inheritances and other changes in land ownership, transfers of entitlements and so on.

Chairman

In a reasonably simple transaction such as transferring a site to a family member, should the simplification process not apply? It is not a considerable issue. While top-line variations in acreage sound like a significant consideration, someone who transfers an acre to his or her daughter should not be ruled out for the simplification process.

Mr. Moran

I agree with the Chairman in that the example cited would not be a cause of great complication. However, it would change the area to which the payments have been attached. If one takes out a small site, simplification should be possible. Other issues, such as road building and that type of development, could change the configuration of the land.

Chairman

On the Department's policy to push for simplification at the European level, will the issue span a number of presidencies or will progress be made under the German Presidency?

Mr. Moran

We hope progress will be made during the German Presidency. We raised the matter with the Commissioner, with a number of member states and at senior official level and the Minister has pressed it at the Council of Ministers. It is only in the past week that an indication from the incoming Presidency suggests there will be 20 technical working groups, whose aim is to simplify matters. The Commissioner is in favour of the idea of CAP simplification as part of the so-called health check in 2008. It is the wish of Ireland, other member states and perhaps the Commissioner to fast-track the payment of the single payments scheme.

Chairman

Could a farmer apply on a single application form, by declaring that his situation had not changed since the previous year and that he is entitled to payment this year? He could then tick a series of boxes to state that full compliance had been achieved.

Mr. Moran

Regarding the eligibility of land, this is the system towards which we are moving. There will be greater emphasis on cross-compliance in the future but this can also be simplified.

Chairman

There were two elements to the issue raised by Deputy Hayes. One is the simplification of application forms. The other is to dispense with the professional advice that farmers now feel they require and the costs associated with that. Can this happen quickly?

Mr. Moran

That is an area that should logically diminish given that the initial setting up of the single farm payment was very complicated for farmers as well as for us. We sympathised with the farmer. As the system becomes embedded it can be simplified. We are working towards that.

Chairman

Could Mr. Moran give us an indication of the range of payments made? What were the five largest payments made and the five smallest payments made? That would give us a flavour of the issue.

Mr. Moran

The average single payment is €10,000. Some extremely small payments are made and in these cases we have sympathy with the issues raised by Deputy Hayes. Those who receive a small payment are frightened by the process of applying. The majority of payments were under €15,000. Some 83% of herd owners received payments in this category, amounting to €534 million and 7% of net payments. Some 75% of these payments were made to farmers in disadvantaged areas. I can provide members with a copy of the table.

Some 229 herd owners received payments in excess of €100,000. Some 1,500 herd owners received sums between €50,000 and €100,000; 11,000 received payments between €20,000 and €50,000; 8,000 received payments between €15,000 and €20,000; 13,000 received less than €1,000; 13,500 received between €1,000 and €2,000; 12,000 received between €2,000 and €3,000; and 20,000 received between €3,000 and €5,000.

Chairman

Concerning individual payments, are payments of €1 million made?

Mr. Moran

There are no payments of that sum. The highest sum was €500,000.

Chairman

Was there a handful of people in receipt of figures between €400,000 and €500,000?

Mr. Moran

Yes.

Chairman

I do not know if Mr. Moran saw a headline in The Irish Times stating that 94% of farm income is represented by direct payments from the single premium scheme and some residual payments. Is that accurate?

Mr. Moran

It is accurate for the year to which the article refers. That was an exceptional year, a transitional year. The old schemes were paid in the early part of the year and because we paid the single payment at the earliest possible date in December the old and new payments were made in the same calendar year. This was a distortion of the payments and, unfortunately, the figures will not be as high again because the residual payments are gone.

Chairman

What will the figure be in 2006?

Mr. Moran

It is close to 80%.

Chairman

Could Mr. Moran give us some information on the concept of modulation, where 3-5% will be withheld for rural development? How is it working, what is the state of progress and will rural development be confined to the agribusiness rather than a wider rural development concept? How does one apply and what groups are eligible?

Mr. Moran

Modulation was one of the new words introduced in CAP reforms. It means shifting from the first pillar, the old-fashioned agricultural pillar, to what was regarded as the structural side of agriculture. The scheme rises from 3% to 4% to 5% of the single payment and is paid to the fund for rural development. This is part of the rural development package that was published two weeks ago and has been the subject of consultation since then.

Chairman

Is it a departmental transfer to the Department of Community, Rural and Gaeltacht Affairs?

Mr. Moran

No, it is not. The difficulty occurs with the use of terminology. The rural development package encompasses a range of areas including farm investment, REP schemes, forestry schemes, early retirement, structural funds and the installation aid. This is what we refer to as rural development and much of it occurs on farms. The recently announced fund of €6.7 billion is for the next six years. The modulation funds are paid into this as part of the contribution to that EU funding.

Chairman

Is it not a separate fund?

Mr. Moran

It is not.

Chairman

Will the general rules apply?

Mr. Moran

Yes.

Chairman

Will the drawdown be modulation specific?

Mr. Moran

No, it will not be.

Deputy Fleming

I welcome Mr. Moran and his staff. Regarding the single payment scheme, I wish to read two sentences from the Comptroller and Auditor General's conclusion on the report:

The introduction of the SPS marks the single biggest change in the operation of the Common Agricultural Policy since its inception over 30 years ago.[...]The evidence available so far suggests that the Department planned its approach to these tasks in a strategic manner and implemented them in a pragmatic and generally satisfactory way.

I reiterate the compliments because the Comptroller and Auditor General often highlights difficulties. It is good to see such a major change handled in such a strategic and efficient manner. This committee is used to hearing about a litany of ICT problems when fundamental changes take place in a Department. Could Mr. Moran share his knowledge with the rest of the public service?

The beef tribunal reported in 1994 but 12 years later the Department is still paying out €147,000. The committee will return to that issue on another day but the beef tribunal has washed its way out of the system. It is a salutary lesson for the Committee of Public Accounts to learn that 12 years after the conclusion of a tribunal, third party legals costs still enter the system. This approach will not be acceptable in the case of current tribunals.

I disagree with Mr. Moran as it is a matter of public record who is awarded costs at tribunals so as to verify whether all costs have been met and how many cases are in the system. Mr. Moran has stated the matter is being dealt with in the Chief State Solicitor's office and I will not ask him to go into detail. However, I wish to put down a marker for current tribunals that we will not tolerate a situation where costs arise after a period of 12 years about which we know nothing in advance.

Every rural Deputy made umpteen representations to the Department about the fact that the early retirement scheme was not index linked. Many who availed of the scheme are now old age pensioners. Budget increases for ordinary old age pensioners did not apply to those participating in the farm early retirement scheme because it was an EU scheme and not index linked. As long as I have been a Member of the Dáil, I have sent letters to farmers explaining that there cannot be index-linking because it is an EU scheme. I am thrilled to hear it can be done. Will Mr. Moran explain the changes made?

Mr. Moran

Index-linking early retirement payments is not possible because it is an EU scheme. However, it was possible to increase the payment to the maximum level the EU would sanction. That is what we did in recent weeks. The payment for the first early retirement scheme increased to more than €14,000, while the payment for the second scheme increased to the maximum level of more than €15,000. This week we announced the amounts are payable from November.

Deputy Fleming

Is this for new or existing applicants?

Mr. Moran

It is for existing applicants under the first and second early retirement schemes. Under the rural development programme about which we spoke, we provided for a new third early retirement scheme, for which the amount is also €15,000.

Deputy Fleming

Will Mr. Moran send an information note to the committee on the numbers of farmers affected and the amounts involved? He may have the information to hand.

Mr. Moran

I will send the committee a note to clarify the matter.

Deputy Fleming

It is interesting because it has been a thorny issue for many of us. I am delighted to hear that while the payment is not index linked, the Department was able to increase it. It is the same thing.

Mr. Moran

The number of applications in 2005 was 300; in 2004 it was 321; and in 2003, it was 540. The numbers have decreased. We hope the figure of €15,000 for the new scheme will attract applicants.

Deputy Fleming

Are those who were involved in the scheme prior to 2003 eligible? The number entering the scheme increases the further back one goes.

Mr. Moran

The amounts for those involved in the first and second early retirement schemes will increase to the levels I mentioned.

Deputy Fleming

How many farmers will receive an increase?

Mr. Moran

A total of 5,000.

Deputy Fleming

Will Mr. Moran supply us with a table containing that information?

Mr. Moran

We will.

Deputy Fleming

The other hardy annual is land commission receipts which amounted to €2 million in 2005. In the light of the legislation passed last year, will Mr. Moran outline for the committee the up-to-date position? Did many take up the incentive of the 25% reduction? How many still pay annuities to the Department? What is the expected annual income flow and for how long will it continue?

Mr. Moran

The legislation provided for a writing-off of amounts of less than €200. The total amount came to approximately €1.5 million in respect of 4,300 accounts. Only 500 annuity accounts are outstanding.

Deputy Fleming

That amounts to very few.

Mr. Moran

The scheme referred to was availed of by 1,640 applicants.

Deputy Fleming

In other words, apart from the 4,000 accounts in respect of which minuscule amounts were written off, three quarters availed of it. Do the other 500 have the option of availing of it or are the shutters down?

Mr. Moran

The scheme was introduced for a period of six months from January to June and was extended until 31 October.

Deputy Fleming

It expired a fortnight ago.

Mr. Moran

The deadline has passed and 500 did not avail of the scheme.

Deputy Fleming

Can anything be done at this stage to encourage them? What options are open to them?

Mr. Moran

It would require legislation to change it. The offer was made to them——

Deputy Fleming

Some 75% took it up.

Mr. Moran

Exactly. It was a good offer. Farmers made a decision not to avail of it.

Deputy Fleming

What income did the Department receive from the 1,600 who took up the offer? I presume the total for fees under the Land Commission heading will see a major increase in 2006.

Mr. Moran

The amount received was €10.5 million.

Deputy Fleming

It should be down to a trickle from 2007 onwards.

Mr. Moran

Yes.

Deputy Fleming

What is the expiry date on most of those agreements? For how long more can they run or will they run ad infinitum?

Mr. Moran

They all have a finite limit but some could run for a further 30 years.

Deputy Fleming

Where does the issue of compensation for former beet growers stand? I know it is being dealt with in court.

Mr. Moran

The answer is in the question. The matter is being dealt with in court. The deal we agreed at EU level provided for the payment of compensation. The overall amount was €145 million which is subject to judicial review.

Deputy Fleming

Has Mr. Moran any idea when the judicial review will be undertaken?

Mr. Moran

I do not have a date but I hope it will be undertaken at the end of the year or early next year.

Deputy Fleming

In the meantime, matters cannot proceed and no movement can be made on the first tranche of payments.

Mr. Moran

It does not affect the timing of payments because the first payment will not be made until the middle of next year. It is hoped the court action will resolve the dispute and we can move on.

Deputy Fleming

Will Mr. Moran give an update on decentralisation, particularly on staffing matters and the tendering process? I look forward to seeing many more departmental staff members in Portlaoise. I understand the tendering process has been grouped with the matter of other buildings.

Chairman

Representatives of the OPW will come before the committee next week.

Deputy Fleming

This is the parent Department.

Mr. Moran

I am delighted to update the Deputy on decentralisation. I note the words of welcome from Portlaoise but we are already there.

Deputy Fleming

I know.

Mr. Moran

We will not be neophytes knocking around Portlaoise where we already had a large office and centred the single payment scheme. We have moved staff to the town in line with our decentralisation plan. Some 50 staff moved last year and 50 more this year. We aim to move a further 50 next year. After 2007, we will be left with approximately 370 employees, of whom some 200 will be information technology staff.

In light of the issues we discussed earlier, the relocation of the latter will be particularly challenging but we hope to manage it in accordance with our overall approach. Some 150 departmental staff are already working in the town and they have been joined by a further 180 people. We have rented premises and are currently working with the OPW to develop permanent accommodation. A site has been acquired and discussions are ongoing with regard to the specifications for our offices. The most recent advice we have received from the OPW indicates that the building will be complete and ready for occupation in 2009.

Deputy Fleming

Has the project been sent to tender or is it still at design phase? I am aware that it is tied up with other offices which are decentralising to Carlow or Mullingar.

Mr. Moran

I understand the project has not yet gone to tender but that the OPW is making good progress. It is being developed as part of a public private partnership project involving offices in Tullamore, Mullingar and Portlaoise. The building in question is quite large, with capacity for 850 people.

Deputy Fleming

Who will be responsible for the disposal of the Government offices once they have been vacated by the Department?

Mr. Moran

Does the Deputy refer to the offices in Dublin?

Deputy Fleming

No, I refer to Portlaoise. We all think locally, so when people in Portlaoise mention the Government offices, they are referring to the Department of Agriculture and Food. Does the Department have any plans for its current offices in the town?

Mr. Moran

That will be a matter for the OPW, which has responsibility for State properties. We are not the only tenants of that building.

Deputy Fleming

It is also occupied by the Department of Social and Family Affairs and a driving test centre.

Deputy Boyle

Remaining on the issue of decentralisation, Cork is one of the few areas from whence the Department has chosen to relocate. Departmental offices in Cork city and on the Model Farm Road are being moved to Fermoy and Macroom, respectively. Can Mr. Moran provide an update on those relocations?

Mr. Moran

Given that 75% of the Department is located outside Dublin, we are already largely decentralised. In County Cork, we aim to move 100 people from the Cork office to Fermoy. In line with the strategy we have adopted in Dublin, we are training people before moving them when we are satisfied they are ready. The process of recruitment for Fermoy has commenced and we are liaising with the OPW on buildings and sites in both Fermoy and Macroom. The Macroom project involves the relocation of three laboratories in Cork and three in Limerick, so it is more complicated in terms of the movement of technical staff. The same process as Fermoy is being followed, although the relocation to Macroom is proceeding more slowly.

Deputy Boyle

Can I assume that staff have not been affected by the changes? The Model Farm Road relocation is particularly contentious, in that many of the staff concerned are based in Cork city and will be asked to commute to Macroom once their offices have moved.

Mr. Moran

Similar challenges arise in respect of all the relocations involving specialist staff who are not necessarily interchangeable.

Deputy Boyle

Given that staff have not moved from the Model Farm Road, the anticipated land swap with the OPW for social housing cannot have progressed.

Mr. Moran

That is my understanding of the matter.

Deputy Boyle

With regard to the single payments scheme, can Mr. Moran provide figures to indicate the cost of administering each application? I refer in particular to grants of less than €1,000. Is there a comparable figure on the costs, in terms of man hours and general administration, of allocating such sums?

Mr. Moran

I do not have figures to hand which indicate the amount per claim, although I am sure they could easily be calculated. Given the way in which we operate, the cost per scheme would not be great. There is no doubt that the costs would be considerably less than the previous schemes because the present scheme comprises a single payment according to the size of land, notwithstanding the changes we discussed in terms of sites. Its administration should be considerably easier than was formerly the case, although there may be something to be said for the direction suggested by the Deputy.

If our system works successfully, all that will be required is a cheque. By definition, a cheque to a smaller claimant should be less complicated than, for example, payments to a large intensive farmer who is affected by a variety of statutory measures. Excluding farm inspectors, approximately 300 staff are employed in administering the single payment.

Deputy Boyle

Is it possible that the cost of administering some of these claims may be greater than the money granted?

Mr. Moran

I would not imagine that to be true for this scheme because our inspections are based on risk assessments, so a concentration of all our expensive cheques on one type of claimant is ruled out. Given the computerised way in which we operate, I cannot see how it would not be worth the cost.

Deputy Boyle

The single payment scheme involves the rationalisation of a myriad of previous schemes. The Department is still responsible, however, for administering other types of support schemes. Can Mr. Moran outline these other schemes?

Mr. Moran

The Department remains heavily involved in administering market supports and, while these are winding down, we continue to pay considerable sums in export refunds. However, the long-term prognosis for export refunds is negative. We continue to operate intervention schemes in the dairy sector, with approximately 25,000 tonnes of butter in storage at present. We support the market by means of intervention and private storage funding. Export refunds are paid on beef and a range of complicated milk products. We also fund forestry payments in a variety of areas. The single payments scheme simply replaced the on farm payment of coupled schemes which were related to animals.

Deputy Boyle

To what extent does the single payment scheme represent the bulk of the Department's support and do a myriad of other payments continue to be made?

Mr. Moran

I refer the Deputy to the figure I mentioned earlier on the rural development plan. Over the next seven years, we will be spending a total of €6.7 billion on those schemes, which include on farm investments such as farm waste and modernisation schemes, installations, early retirement, forestry aids and REPS. We are funding a variety of areas in addition to the single payment and it is incumbent upon us to use the next seven years to develop the agri-food sector so that it can continue to grow when the supports are inevitably downsized after 2013.

Deputy Boyle

My final questions relate to the rural environment protection scheme, REPS. What is the extent of REPS at the moment? What is the number of people availing of the scheme? What has been the level of transfer from the previous programme? I believe some people did not transfer. What is the level of ongoing monitoring? What is the linkage between the payment of REPS and the incidence of agricultural pollution? In particular, to what degree is the REP scheme linked to the incidence of carbon production in agriculture, which is a significant element of our national carbon production?

Mr. Moran

The Deputy is right on a number of points. REPS is very important and central to agriculture in the future. REPS is where agriculture meets environment and the sustainability of natural habitats. Under the single payment, farmers are obliged by law to do certain things, which are checked. REPS involves payment for enhanced environmental care and is hugely popular. At the moment, 54,500 are in REPS 2, with 11,500 on top of the 43,000 who were in REPS 1. We have provided for and are working on REPS 4 at the moment as part of the new rural development programme and the plans have been put out to consultation. It is an interesting development of REPS 3 in that it allows for the participation of more intensive farmers, such as some dairy farmers who would not previously have been able to participate in REPS. They are joining it willingly and, in return, take greater cognisance of the environmental requirements of managing a more intense farm.

The numbers in the scheme will increase from the figure of 54,500. The newspapers have speculated on the ultimate figures but it is a very popular scheme and society benefits from it. It benefits areas such as waste management as well as specific areas such as natural habitats and heritage preservation. It is a success and I hope it will continue to be.

Deputy Boyle

To what extent are REPS payments, currently or in the revised structures, linked to other national policies such as the climate change strategy?

Mr. Moran

REPS is developed in conjunction with the Department of the Environment, Heritage and Local Government and the national parks and wildlife service. A huge range of areas, such as natural habitats which are run by the Department of the Environment, Heritage and Local Government, spill over into REPS. There is a joint effort for both schemes.

Deputy Boyle

I am asking a specific question. I forget the actual percentage but agriculture is third in the list of producers of carbon emissions, after transport and energy production, with a figure of between 15% and 20%. There is a price to be paid by the nation one way or another, in general taxation or whatever other way we decide to make up that money. Mr. Moran said this is a payment for enhanced environmental purposes. To what degree is the Department involved in ensuring there is a saving to the State in this area? I have not yet heard an answer.

Mr. Moran

I will be more specific. The contribution of agriculture to overall climate change is, in the main, positive. The biggest contributor is livestock and the overall trend in livestock numbers, for example in sheep, is downward. The trend in the country as a whole, because of the growth in other, more carbon-intensive areas of the economy, is, as the Deputy knows, in the other direction. Agriculture is making a contribution in that area. The idea of decoupling will, in theory, bring down the number of livestock and the projections are for that to happen. It is the stated intention of the European Commissioner — whether it becomes European policy is another matter — that the EU as a whole decouple, as Ireland has, from 2008. That will inevitably mean a reduction in animals across Europe.

The Deputy is right. Animal production is a huge contributor to greenhouse gases, although I cannot remember the figure offhand. Specific aspects dealing with the issue include the way slurry is spread. A mechanism to avoid leaching is being brought into REPS 4 and we are driving it hard.

Deputy Hayes

Money was returned unspent in respect of installation aid. Yesterday, at the national dairy conference Mr. Paddy Brown, the assistant director of Teagasc, said that farmers no longer encourage their children to stay on the land. There is a widespread view that a young farmer would be better off doing anything else, which is a pity and is bad for the long-term viability of Irish agriculture. Despite all that has been said, there is still a good living to be made on the land. How does the Department propose to deal with the issue of young people not being encouraged to stay on the land? It is a broad question but what I see around the country concerns me.

Mr. Moran

I will answer the specific question on installation aid before the general question. The new rural development programme which we have put out to consultation provides for a dramatic increase in installation aid, from approximately €9,000 to approximately €15,000. That will not of itself achieve what the Deputy wants. It is not just a question of young people being discouraged from going into farming because a range of economic agents is at work. One is the strength of the economy elsewhere and there is a push and pull factor in that regard. There was a time when people stayed on farms because other options were not immediately apparent in their area, but that is not the case now.

The Deputy mentioned dairy farming. The average dairy farm in Ireland has approximately 45 cows. One has to ask whether a young potential dairy farmer would give up the opportunity of working in a town to take over a dairy farm with 45 cows. In reality many do not. How can we change that to bring more young people into farming? One has to encourage dairy farmers to upscale, which is what we are doing. That was mentioned at the conference to which the Deputy referred. The average dairy farm in the country will have to increase and we are facilitating that by allowing choices. If people want to get out of milk, others can come in at a reasonable cost and secure more quota. A young farmer who sees a future on a dairy farm needs to be very aware that he or she cannot do so with 45 cows. He or she must increase the number to 70, 80, 90 or 100 cows.

Deputy Hayes

Leading from that, what is the future of the quota regime? Will milk quotas remain in the long term, as there is something going on at the moment so that some people are concerned about quotas being distributed? I am not totally clear on it.

Mr. Moran

Legally, the quotas will remain until 2013 or 2014. The Commissioner has made known her very strong view that quotas will not be there after that. In the so-called health check on the CAP in 2008, it will be the Commissioner's intention to put in train preparations to get rid of quotas after 2013. Although that is the Commissioner's view, there are different views throughout Europe on where quotas should go. If quotas go, it will change the economics of milk production, and milk may not be produced in areas where it is currently produced. Ireland has not yet taken any definitive position on where quotas will be after 2013. We have taken a very strong position that we should not in the meantime do anything to leave us hostage to decisions taken at EU level in future. That is why we are introducing new quota transfer arrangements to ensure quota is transferred to allow people's herds to increase but not at a price that compels people to carry a burden of quota into a period when milk prices might be lower than they are today.

For example, the quota price in Holland is approximately €6 per gallon. A farmer buying a quota at that price is very dependent on a milk price which will make a return the farmer can live on. The milk quota price in Ireland under last year's scheme was 57 cent per gallon. The difference is noticeable. We should not do anything in the meantime that would cause us to be at a disadvantage if and when there are changes.

I cannot speculate on the future of quotas, but the world and his wife are talking about quotas not having a ripe old age beyond 2013. That will depend on a political decision in the Council of Ministers in mid-2008.

Deputy Fleming

On quotas specifically, did Ireland reach its quota of milk production in the last quota year? Were we under the quota?

Mr. Moran

I think we were under the quota last year.

Deputy Fleming

That might have been one of our first years to be under quota, as the issue every year concerned superlevies.

Mr. Moran

We have been under quota for one or two years. The Deputy is correct that the trend is such that we are up against the wire. We are under pressure.

Deputy Fleming

What is expected for this quota year, will we be under quota?

Mr. Moran

We were very much under the quota in the summer months, but the mild autumn and good grass growth has turned that around. The issue will depend on whatever happens after Christmas, but we expect to be at or about the quota.

Deputy Fleming

Given that we are heading to a position where we may not achieve the quota in any event — we did not last year and may not next year — why would the price of 57 cent per gallon be paid if the country is not over quota and there is no superlevy? One can see where this is heading. The issue of having a quota may not be as relevant as it was if the country is under the quota.

Mr. Moran

That is the reason we have introduced a new scheme of market exchange for quotas. We have stepped back and are not saying any more on this. We will not fix the price for the quota, and if a farmer wants to get out of milk production, he or she can sell the quota into an exchange and the market will determine the price for that quota in the various co-ops. We will put in a mechanism to stop the price over-heating, as we do not want a Dutch case where the quota price is too high. The market will determine the issue. It is not really an issue in Ireland. Whether we are under or over quota depends to a very significant extent on grass growth, climate and so on. The UK has not filled its quota for some years. Much of its quota has moved to Northern Ireland.

Deputy Fleming

Does that explain why supermarkets here can buy milk in Northern Ireland at a cheaper price, as producers there do not have the hangover of what used to be a higher quota costs?

Mr. Moran

It would be a contributing factor to a competitive pressure.

Chairman

On the single payments, the arguments that used to be rehearsed on decoupling payment from production was that the industry would become more market-oriented and more responsive to consumer needs and issues such as quality and safety would be paramount. As with other business, the move would be to supply the market as represented by consumer demand. To what extend is there evidence of this occurring, now that decoupling is in place and we have the single farm payment?

Mr. Moran

In the beef and cattle sector where decoupling has been most prominent the European market is currently approximately 500,000 tonnes in deficit. That is from a period where it was in major surplus. When it was in surplus, we were sending roughly 50% of our beef outside Europe to countries such as Egypt, Russia and so on, where we were absolutely dependent on export refunds. In other words, it was not a commercial decision that determined where we would send our beef to a large extent, it was decision in Brussels on the level of refund. Some 90% of the beef is now going to supermarkets and so on in Europe, where a key element will be the quality of the product. The industry is becoming totally disjointed from support systems and selling into what various supermarkets will buy. That will be based on quality, safety, guarantees and reliability, which will feed back to production at primary level with regard to breed, traceability and guarantees offered. The competition is fierce from non-EU countries. The system is working and will work even more in future.

Chairman

I presume the movement away from headage leads to a reduction in numbers, as the bad animals hanging around farms are no longer there.

Mr. Moran

That is the theory, which may be realised. If a farmer has to keep 20 cattle to receive 20 subsidies, he or she will keep 20 cattle and maybe the type of creatures about which the Chairman talks. However, if the market is very strong one might replace those 20 with 20 decent animals of a proper breed and structure that will eventually go to the supermarkets as one wants. Much depends on the market. The producer is free to follow the market return rather than the subsidy.

Chairman

That is beginning to happen.

Mr. Moran

Yes.

Mr. Purcell

I will return to staff savings, which should come about as a result of the changing role of the Department, how it is organised, and the schemes it administers. It is important that savings associated with reduced staffing requirements are realised.

If I shed the mantle of being the Grim Reaper which I wear every week, it would be of concern to the committee, so I am looking at a note on the Department's file in this matter. The accounting officer indicated in his opening statement that the Department aims to reduce the Civil Service numbers to 4,130 whole-time equivalents by the end of the year. The Department of Finance would maintain the target should be 4,065, with a further reduction to 3,950 next year. The alignment of the two targets and which is most valid must be resolved.

Mr. David Denny

The Department of Finance is involved in discussions with the Department of Agriculture and Food on the extent to which staff savings can be achieved. There is a minor disagreement between us over whether reductions due to be made under Government policy on the reduction of Civil Service numbers should be counted, in addition to staff savings resulting from the single payment bounty. The Department of Agriculture and Food has taken one view and the Department of Finance another. We seek the greatest possible number of reductions to secure better savings for the Exchequer.

We agree with the comment made in the Comptroller and Auditor General's report that significant progress has been made in seeking the first reduction of 400. We pay tribute to the staff of the Department of Agriculture and Food and other Departments which have co-operated. We see scope for further reductions of 115 in veterinary offices in the coming year. However, we are conscious of the fact that a major operational change has been made in the Department, as mentioned by the Accounting Officer, and that the Department's size and geographical distribution have led to certain rigidities. It is understandable there would be a degree of caution in introducing a new system, with Departments keen to keep staff until the new system has been bedded down. Also, staff concerns had to be addressed. Allowing for this, we believe there have been significant reductions and greater progress is expected in the next 12 months as the system beds down. This should result in further reductions by this time next year.

Chairman

Is it agreed that we should note Vote 31 and dispose of chapters 10.1 and 10.2? Agreed.

The witnesses withdrew.

Chairman

The agenda for our meeting on Thursday, 23 November is as follows: 2005 Annual Report of the Comptroller and Auditor General and Appropriation Accounts, Vote 10 — Office of Public Works.

The committee adjourned at 1.25 p.m. until11 a.m. on Thursday, 23 November 2006.