: I propose to confine myself to the agricultural sector and I intend to deal in particular with the problems being experienced by that sector as a result of the current economic recession and with the steps that the Government have taken and will be taking to deal with those problems.
Before I do there is one matter I wish to raise. Yesterday in this House Deputy G. FitzGerald referred to some newspaper reports that the leaders of the farming community were threatened and intimidated when they met with members of the Government last Friday. The Deputy stated that they were warned that, and I quote, "there would be no more goodies for them unless they behaved themselves between now and November 6".
For the Deputy's information and for the information of the House, I was one of those present at that meeting and I can categorically state that no such threat, or indeed any threats of any kind, were made there. I challenge Deputy FitzGerald to check his facts with any farmer representative who attended that meeting. Our Government does not resort to the type of actions which seem to occupy the imagination of the Opposition. Deputy FitzGerald enjoys the reputation of being an honourable and a fair man. I would ask him now to have the honour to withdraw his remarks of yesterday. I would further ask him to apologise to the leaders of the farming community for the implied naivety with which he credited them by suggesting that they would succumb to threats, veiled or otherwise. In my many dealings with the farming sector I have found their leaders most diligent and motivated by a genuine concern for the farming community. This concern is shared by the Government.
To return to the motion before the House, let me emphasise that the Government are neither unaware of nor insensitive to the problems being experienced by the farming community. They readily recognise that there are problems and in the various measures announced over the past month they have shown in a positive way what they are prepared to do to help farmers to overcome their problems.
The current year has been a difficult one for farmers; both the physical climate and the economic climate have been unfavourable. The wet summer had two major consequences: first, the amount of winter fodder was affected and the quality of much of it was below normal standard: secondly, the cereal harvest was badly affected with a lot of grain being harvested in very wet condition. This again has led to quality problems. In relation to the fodder difficulties, the Government met the farm organisations and then took swift and effective action. The fertiliser, silage and fodder subsidies which we introduced in August have been most successful, and many farmers who would otherwise have been badly caught for winter feed are now in a much happier position. Fertiliser use increased substantially and there was a big increase in the number of farmers making autumn silage as compared to last year.
The weather problems of recent months have accentuated the economic and financial difficulties. These difficulties have their origin in the general world economic recession and in the fact that our rate of inflation here has been much higher than the price increases that have been realised by farmers. The prices farmers have to pay for their inputs and their costs generally have continued to rise, and there has been an inevitable cost/price squeeze on the agricultural sector.
That is not to say that real and tangible progress has not been made in the agricultural sector. Much of this progress has gone unnoticed in the current debate on farm incomes. We have forgotten very quickly the situation we were confronted with before and during the prices negotiations at the beginning of the year.
One of the main objectives of the common agricultural policy is to ensure a fair standard of living for the agricultural community. I do not honestly think that there is anyone who will dispute the fact that the CAP has brought considerable benefits to Irish farmers through improved and unrestricted access to markets, and participation in the Community's price support system.
It is worth noting that prices in the Community are considerably higher than those available to producers in most third countries which have to rely on world market returns for their produce. Now, however, with the increasing pressure from consumer interests and the preoccupation of certain member states with the level of the Community's expenditure on agriculture, increases in prices at EEC level are not easily secured. This was certainly the case with this year's price negotiations which were long and extremely difficult from our point of view.
In the end, however, the compromise package which emerged was a reasonably satisfactory one under the circumstances. It did not give us all we wanted or sought in the Council but compared with what seemed likely at one stage, it represented a significant improvement. The Commission's original proposals were for an overall increase of 2½ per cent in prices with an even smaller increase suggested for the milk sector. Even though the final price rise agreed was less than what I would have wished for, it nevertheless represented a considerable advance.
Equally important from our point of view were the Commission's proposals for dealing with farm surpluses and restraining budgetary expenditure. These included measures which, if they had been implemented, would have had a particularly serious impact on our agricultural industry and stifled its long-term development. The super levy on milk would have had major implications for our dairy industry. It would have discriminated against us because our dairy industry, with its low milk yields, has not attained anything like its full potential.
The proposals to suspend beef intervention during the summer months was also most disturbing. I have often said that I deplore over-reliance on the beef intervention system and I have urged our factories to concentrate their marketing efforts to a much greater extent on commercial outlets. Nevertheless, a complete close-down on intervention buying for the considerable period proposed would have been a drastic step and would have had a most unfavourable impact on prices to cattle producers. That is why I flatly opposed these proposals with the full backing of the Government, the agricultural industry and the farmers.
On the structural side the price negotiations brought some real gains. The western package was adopted by the Council of Ministers and represents a very substantial injection of assistance for agriculture in the western counties. It means that up to £300 million will be spent in the area over the next ten years. I am confident that this scheme will entail real progress for agriculture in the west of Ireland and will ensure that by improving infrastructure the standards in agriculture can be raised to levels more comparable with those in other parts of the country. Work is well advanced on the preparation of a detailed programme for submission to the EEC Commission and consultations are taking place with interested organisations. My intention is to have the new programme in operation from 1 January next. Indeed the higher FEOGA grants for processing and marketing projects in the west have already been introduced.
The new programme will cover such aspects as improved water supplies, the development of rural electrification and the provision of an adequate network of roads. Schemes are also being worked out to encourage land improvement through commonage division and reclamation. Attractive grants will be provided for these purposes. It is also intended to provide encouragement to beef producers in the west to improve production through a calf to beef system. Furthermore agricultural education facilities in the area will be expanded and a programme of forestry development will be introduced.
Already one aspect of the package has been introduced. EEC grants of 50 per cent are now available under the FEOGA Scheme for processing and marketing projects in the west of Ireland. This compares with a grant of 25 per cent under the existing scheme and is in addition to the national grant of up to 25 per cent. Thus a project can be grant-aided by as much as 75 per cent. As I have said, this package represents an impressive package of measures for the development of agriculture in the west. The beef suckler scheme, to which I will refer later, was also negotiated as part of the price settlement.
Recent developments at EEC level have seen the completion of the common policy for sheepmeat. This policy has been the subject of long and sometimes acrimonious debate extending over several years. During that time our sheep industry suffered from uncertainty although our access to the French market in recent years was of immense benefit. The completion of the sheepmeat policy represents a very definite achievement. It means that our sheep industry can now face the future with greater certainty and confidence.
Sheep farmers who have hitherto been at a serious disadvantage compared with producers of other products are now on an equal footing with them. They now have as good a support system as applies to other products. In addition, there is provision for a special support to compensate producers for any reduction in prices that may result from the opening up of the Community market. As I announced last week, this will take the form of a headage payment on ewes which should amount to about £7 per ewe in a full year. There will be no limit on the number of ewes eligible for the premium and it will be paid without regard to the producer's income. Apart from this there will be unlimited access to all EEC markets and there will be improved opportunities to develop exports to third country outlets.
In my view, the outlook for the sheep industry is now more satisfactory than at any time over the past few years and I look forward with confidence to an expansion in production. In particular I see improved prospects for the mountain sheep producers especially where adequate attention is given to management and feeding practices. I would urge mountain producers to concentrate on improving the management and feeding of their flocks. With greater attention to these aspects they can derive substantial benefit from the new arrangements.
The support for sheep meat provides for private storage and for intervention. The question of having or not having intervention was one of the most hotly debated items. Some countries, looking at the cost of intervention for products such as beef and and milk, were reluctant to have intervention for sheepmeat and it was only after long argument that they agreed. This again reflects the very difficult budgetary situation being faced by the Community. I would hope that the market will remain sufficiently strong to enable us to avoid intervention. Incidentally, when intervention is used there has to be a cut-off in the amount of the ewe premium; in other words, the compensation through the ewe premium would have to stop at the point where the interventon would take over. However, if intervention has to be used, used it will be, but I do hope that our hopes for a continuing good market will be realised. The first reports we have to hand from the market this week show a heartening increase in producer prices. I hope that this position will be maintained and indeed improved further.
I would also like to refer to some criticism of the arrangements which the Community have made with third country suppliers such as New Zealand and Australia. Any such criticism is not well-founded. It was essential to have agreements with these countries. Otherwise, we could not have had a lamb regulation. The first essential in any common market system for a product is protection for Community production. Because of a GATT agreement made in the sixties imports of lamb were guaranteed for third country suppliers in unlimited quantity and with a bound customs duty of 20 per cent as the sole frontier charge.
The enlarged Community had to accept the same obligations. To enable a common market system to be introduced it had to be possible to limit the quantities coming into the Community and so it was agreed with the supplying countries that they would voluntarily restrict their supplies. In return the Community undertook to reduce the duty from 20 per cent to 10 per cent. Also these countries are agreeing not to send their lamb into sensitive markets in the Community, that is, into France and Ireland. These arrangements with third country suppliers are also due to be reviewed in four years time.
The new regulation also provides for refunds on exports to third countries. I am anxious that these should be available and I am continuing to press the Commission for them. However, it is only fair to say that in the negotiations with overseas producing countries regard had to be had to their fears that subsidised Community supplies would hit them in their traditional markets. This is a sensitive aspect and we have to be careful about it.
Before finishing on sheepmeat I should like to say again how glad we are that we have at last achieved a common market system. It is a workable and useful system and with the benefits it provides Irish producers and processors can look forward to an industry increasing in volume and in prosperity.
We continue to make progress in reducing the incidence of bovine TB and Brucellosis.
At this juncture, the advances made in eradicating brucellosis look particularly encouraging, and in the light of recent trends I have recently decided to extend the full compulsory eradication programme to the entire country. The results from the current round of testing in the 17 counties of the free and clearance areas show the herd incidence to be 2.8 per cent and the animal incidence at 0.39 per cent. These compare with 4.5 per cent and 0.9 per cent respectively at the end of the last round. I am satisfied at this stage that we can look forward to the virtual total eradication of brucellosis from the national herd within five or six years.
The progress in eradicating TB is less spectacular. The first results from the tests now in progress show a marginal improvement on the last round. Nevertheless, the indications are that the last residues of TB could prove difficult to eradicate. An all-out effort on the part of all concerned will, therefore, be necessary during the next couple of years to get on top of this disease.
I have been keeping the operation of the eradication programme, and particularly the 30-day pre-movement test, under continuous review. In this context the first consideration at all times must, of course, be to ensure that there is no disruption of our export trade in cattle and beef. The 30-day test is enshrined in EEC Directives relating to trade and it is not, therefore, open to us to drop it unilaterally. Member states whose own disease situation is much better than ours are entitled to protect themselves against the risk of introducing disease. On this account it is not possible for us on our own to contemplate dropping the 30-day test at this juncture.
I did in fact take a hard look at the 30-day test shortly after I became Minister for Agriculture and decided then to ease the problems being encountered in some cases, especially by exporters of live cattle, because of the 60-day interval required between retests for TB. I reduced that interval to 45 days subject to certain conditions and this has proved a useful concession. I undertook also to ensure that the results of brucellosis blood tests would get back to farmers with the minimum of delay. In so far as the work at my Department's laboratories is concerned that undertaking has been met. There is no delay and the system is working well. I am aware, however, that in odd cases problems are still occuring for various reasons such as delays in despatching samples to the laboratories. I will be taking these problems up again with the veterinary profession to ensure that the interests of herdowners, particularly those wishing to sell cattle, are protected.
I hardly need to emphasise again that the eradication of TB and brucellosis is vital to protect our exports of cattle and beef. Since time is running against us, we have no room for complacency. If, however, we achieve the progress that we ought to achieve we could then consider the possibility of securing some relaxation of the tight regulations that are necessary at present.
There have been other significant developments on the domestic scene. I have shown my concern for the plight of the small farmers by, for example, increasing the level of headage grants. Indeed, as I shall be indicating in more detail later, I have made two increases in the headage rates this year. Early in the year I announced the re-introduction of the Mountain Lamb Extension Subsidy Scheme and here again the rate of subsidy was increased recently. It was in fact doubled—going from £1.50 to £3. The producer price of liquid milk was also increased by 5p per gallon during the year.
As regards the current difficulties in farming, the Taoiseach, the Minister for Finance and I have had a number of meetings with the leaders of the farm organisations. We have not shirked the issues in any way. The measures we have introduced are the real evidence of our commitment and determination to help the farmers in their present difficulties. In particular, we are concerned at the implications these difficulties have for producer confidence, and for future development and expansion of this vital sector of the economy.
Within the existing financial and other constraints, the Government have provided for a range of measures to alleviate current difficulties and to promote renewed investment and expansion in the industry. A major objective of these measures is to encourage expansion of the national breeding herd, particularly in the western counties. This expansion is essential to the future well-being of agriculture and the economy as a whole. Arising out of the Government discussions with the four associated banks about the present position of farmers' indebtedness, the banks indicated that they will take a constructive and positive approach to the restructuring of existing loans on a case by case basis where farmers are faced with serious repayment problems. The banks consider that this, coupled with the recent reductions in interest rates, should substantially ease the position. Following an approach from the Government, the ACC are reviewing the situation of farmers with serious repayment problems and restructuring existing loans, where appropriate, on an individual basis.
At the same time, in order to increase the incentive and facilities for productive investment in agriculture, the associated banks, arising from discussions with the Government, are making available up to £50 million from foreign borrowings. This will be lent to farmers at variable interest rates currently in the range of 13 to 13½ per cent. The types of investment covered will include additional working capital where the farmer's own funds are seriously depleted, the financing of increases in breeding stock, land reclamation and drainage, fodder storage and building for additional livestock and assistance to young farmers taking over holding for the first time. This new scheme, together with that already in operation by the ACC, makes available £100 million for the development of agriculture at rates well below those prevailing today and will give a substantial boost to farmers investing in farm expansion programmes.
In order to ensure that these schemes work effectively, two liaison committees are being established between the farm organisations and the banks and with the ACC. It will be the task of these committees to ensure that the schemes for restructuring and for productive investment operate in practice in accordance with the spirit in which they have been set up.
Investment under the Farm Modernisation Scheme and the Western Drainage Scheme has continued at a high level this year. The Government welcome this as showing confidence by the industry in its future and as a valuable source of employment. The continuing high investment has inevitably put pressure on the system. As much as £15 million extra has been provided to meet outstanding claims for grants which had been approved and for which the work had been completed. This will bring the total expenditure this year to £51.5 million, an increase of more than 50 per cent on last year. All the indications are that interest in the scheme is being well maintained. In fact, the level of approvals so far this year is appreciably higher than for the same period last year. In the first nine months of 1980 the number of approvals issued for new buildings and land improvement projects was 35,700 involving an investment of £126 million as compared with 32,400 approvals representing £112 million investment in the corresponding period of 1979. The substantial increase indicates that farmers have faith in the future of agriculture.
The improved rates of grants which I announced on 1 August, under both the Cattle Headage and Beef Cow Schemes, have recently been increased a second time by £10 to £32 and £28. The new rates will apply to this year's headage payments and are approximately double last years rates of £17 and £13. They will provide a strong incentive to expand the beef-breeding herd and so counter the downward trend which has applied for the past six years or so.
As I said earlier, a beef suckler subsidy was approved as part of this year's price package. This scheme has now been introduced. A grant of £13.18 financed by the EEC will be paid on cows in beef suckler herds in all parts of the country with an extra grant of £12 paid out of national funds on each additional cow in a beef suckler herd. These new measures constitute a further significant encouragement to expand the suckler herd. These measures should ensure a greater degree of security for our beef industry as regards the procurement of raw material. Taken together with the headage grants a farmer in the disadvantaged area can now get as much as £57.18 for an extra beef cow. This is certainly a worth-while incentive.
There is great need for farm relief services especially for dairy farmers. With a view to encouraging the provision of such services on a more organised basis, the annual grant to Macra na Feirme will be increased for five years to enable that body to organise and co-ordinate the establishment of local farm relief services on a group basis. Part of the grant will be to provide for central organisation and administration and part will be to assist the formation of groups at local level. This will help generate new jobs in the rural areas.
The package announced last month also doubled grants under the Mountain Lamb Extension Scheme, as I have already mentioned. This scheme has been of considerable benefit in getting lambs off the mountains for feeding in the lowlands. I believe that the vast bulk of the mountain lambs have in fact been sold off. The package also provided for assistance towards this year's campaign against the warble fly, and is enabling farmers to have their cattle dressed for the same charge as applied in 1979.
Strong representations have been made by the farming organisations about the difficulties of farmers, particularly those in the £40-60 rateable valuation category. As a once-off measure, because of the decline in farmers' incomes the Government have arranged that for farmers in this category the second moiety of this year's rates will not be collected. Also for farmers in other categories, the local authorities will adopt a sympathetic attitude towards individual farmers who clearly have temporary difficulties in meeting their rates liabilities.
These various measures show the determination of the Government to see that the agricultural economy develops in all its sectors. As well they reflect the Government's concern for the farmers' current situation and their willingness to do what is possible to help.
While the prices fixed in Brussels determine the general level of the EEC market, they are subject to the efficiency with which products are processed and are sold in the market place. It is in these latter respects that we will have a substantial leeway to make up. The prices realised for Irish farm products are below those of many of our competitors in the EEC. Of course, our geographical situation imposes additional costs on us, but these do not account for all, or even the larger part, of the difference between prices for Irish farm produce and those realised by farmers in other member states. I am not happy with this situation in the context of our membership of the EEC. The discrepancy in prices is consistently too wide and it is unacceptable that Irish prices should be so low. It is my intention to raise this matter at EEC level in order to eliminate any factors in the management of the CAP which contribute to this situation. On the other hand, some of the difference is directly due to the practices followed at farm level—for example, in the types of beef cattle which we produce. There is also the question of the efficiency with which the produce is processed and marketed.
The main farm products are exported either directly through marketing bodies on which farmers are represented, such as Bord Bainne and the Pigs and Bacon Commission, or are subject to promotion and market development through a semi-State body such as CBF, again with farmer representation. It is vitally important for us to improve our marketing as we need to gain the maximum value from our produce in view of the increasing difficulties in securing adequate price increases at EEC level. No matter how efficient production is at the level of the producer much profit is lost if marketing is not efficently done. We have some examples of efficent marketing and when I say efficient I have in mind, in particular, centralised marketing. We have the case of Board Bainne which engages in centralised marketing in a very efficient manner.
I make this point in order to contrast that situation with the situation in regard to pigmeat. Here I am sorry to say that we have a marketing system which leaves very much room for improvement. Our total availability of pigmeat for export is quite small but nevertheless there are people in the processing industry who insist on exporting comparatively minute quantities of bacon as an independent exercise and without any effort to co-operate with the majority of processors who are willing to conduct centralised marketing. I might also say that those who insist on going it alone are quite prepared to reap on the home market the benefits gained from the co-operative effort of the majority of processors.
I would appeal to those people outside the centralised marketing system to join in the system which is, of course, entirely voluntary. By so doing they would be helping the whole industry not only in regard to the maintenance of the present trade but in efforts to change over to more added-value types of products. The pigmeat industry has been going through a bad time. The main export market in the UK has been weak and the industry has been suffering from the problems that I have referred to earlier about marketing. It is a very important industry and over the years has undergone considerable change especially in the level of pig production.
Production is concentrated nowadays in large intensive units. Similarly on the processing side there has been some rationalisation, though I would add that there may be room for more in order to improve the efficiency in processing. I am very much alive to the present problems of the industry and in recent weeks I have had a number of meetings with the various interests. I have been considering ways and means of helping the industry over its current difficulties and I shall again be meeting all the interests concerned at the beginning of next week.
With a view to furthering the drive for increased agricultural exports, the Agricultural Exports Co-ordinating Group was set up in 1978. The group supplements and co-ordinates the export promotion activities of the existing agricultural export agencies and acts in liaison with Córas Tráchtála. The Government have made available a sum of £75,000 this year to finance suitable promotion projects and this sum has been matched by an equal contribution from the agencies themselves. Most of this money is being used to pay for advertising campaigns for Irish food products in two countries—France and Germany—in which the group had already carried out surveys. Other projects are at present under consideration.
Dairying is the sector in which there has been the greatest development over the past decade. Productivity and output have expanded dramatically with the result that dairying now rivals beef in its contribution to total agricultural output. The value of dairy exports at over £600 million a year is a clear measure of the vital importance of the sector to the economy as a whole. The dairy sector has not, however, been any more immune than other sectors to the adverse effects of recent economic difficulties. High interest rates and inflation affect dairy farmers in the same way as all others.
There is, however, an additional consideration arising in regard to the milk sector. More than any other group, the prosperity of milk producers is affected by the decisions taken in regard to the Common Agricultural Policy. Unfortunately, the substantial surplus in the milk sector—to which admittedly this country contributes only marginally—is causing severe problems and is a major factor in pushing the level of Community expenditure towards the limit of its present resources. It still has some way to go before the VAT limit of 1 per cent is reached but the pressure of milk expenditure is nevertheless greatly influencing the drift of policy.
The only real solution to these problems lies in the restoration of a better balance in the milk sector on the one hand and a re-organisation of the Community's financial base on the other. These developments must eventually come, but in the meantime more short-term and cruder solutions are likely to be put forward. In the price negotiations last spring, I opposed the imposition of a superlevy on creameries which increased their intake or on farmers who increased their deliveries, but an increase in the general levy had to be accepted. This was somewhat less for producers in the disadvantaged areas and the overall effect of the settlement was a net price increase for the industry generally. However, the basic problem in the milk sector remains and, therefore, we can expect further proposals to deal with it. The Government fully appreciate the need to solve the surplus problem but in our view remedial action should not penalise or discriminate against our underdeveloped industry. We cannot and will not accept artificial barriers to the development of the dairy industry in Ireland.
Moreover, action to restore balance should not be confined to Community producers alone. It should also apply to imports from outside the Community. In other words, all suppliers to the Community's market must share the burden of solving the milk surplus problem.
With that approach, I believe it will be possible to reach decisions at Community level which will not frustrate our development aspirations. Accordingly, if we keep our own house in order, we can look forward to renewed expansion in the industry.
For a large majority of Irish farmers dairying remains by far the most profitable farm enterprise. All the information available to us proves that by somewhat better management and higher stocking rates we can dramatically improve output and incomes in the dairy sector. The Government will continue to do all in their power to ensure that the environment, both externally and domestically, is such that this improvement is encouraged. With a sound processing and marketing base, I believe that we can expect substantial development in the industry in the coming years.
This year the problem of obtaining a realistic price for farm products has become much more acute. Prices for most farm products are not as satisfactory as we would like, in spite of all the efforts we have made to realise an improvement. Cattle prices have, however, held firmer in the past month than at this time last year, and I hope that this position will be sustained over the coming months. The level of activity in the cattle and beef industry is higher than last year. So far cattle disposals are up by 36 per cent.
At this time of the year the cattle market generally is, of course, affected by the seasonal increase in supplies of finished animals. This year there have also been the effects of the economic recession. In particular these adverse conditions have affected the price of heifers. On top of these, there have been the British animal health controls which hit the traditional export trade in blue-grey heifers. Because of these factors, some action to help the heifer market was called for and so pending the necessary clearance of the EEC Commission for the resumption of intervention for heifer beef I decided recently that heifer slaughterings by the meat factories should be allowed to count in the weekly calculation of the amount of beef taken into intervention.
I am confident that this alternative measure will have the effect of strengthening the market price of heifers and indeed of steers also, as well as boosting producers' confidence. It is intended only as a temporary measure to alleviate the current weakness in the heifer market. I have made it clear that in taking this step I am conscious of the need to discourage the slaughter of any potential breeding stock. The heifers likely to be slaughtered over the next few months would, however, be slaughtered in any event and would not be used for breeding.
Farm incomes depend upon not only the level of prices and costs, but also the level of output. For this year the present indications are that net output will increase significantly, possibly by 8 per cent to 10 per cent or so and thus regain all the ground that was lost last year. This would come from a small increase in gross output and a substantial saving in the use of inputs, particularly feedingstuffs. While farmers will be seeking to reduce unremunerative inputs, it will not solve our problems if they go too far in adopting low input/low output production systems. The higher net output would, of course, help towards overcoming the problems faced on the prices side.
As regards EEC prices, the increases in recent years have not been at all adequate to compensate for farmers' cost increases. This situation cannot continue. Farmers should receive returns for their products which would maintain their incomes and enable them to keep their enterprises operating at proper levels of efficiency. I can assure the House that I will be insisting on substantial price increases for the coming year. I am confident that there will, in fact, be a more realistic attitude in Brussels on this issue. Several other Ministers of Agriculture will have the same interest as I will have because the current farm income problem is not confined to Ireland but indeed affects most of the Community. At the same time we ourselves must strive to improve efficiency and productivity at all levels from the farm to the market place. The introduction of new grants for ewes and beef cows together with the much higher headage payments under the Disadvantaged Areas Scheme provide a strong incentive to increasing beef and sheep breeding herds. I have no doubt that farmers will respond and increase the numbers of breeding stock. This is crucial if we are to expand output over the next few years.
Considerable investment and improvement has taken place at farm level in recent years. Individual farmers are better geared than ever to take advantage of the opportunities available to them. The investment must be properly applied and not left idle. As I have already said, there has been a substantial increase in applications under the Farm Modernisation and Western Drainage Schemes this year. This shows that there is underlying confidence in the future of the agricultural industry and that farmers are prepared to demonstrate that confidence by investing their own money in the improvement of their holdings.
The establishment of ACOT marks an important development in agriculture. This new organisation is intended to give a greater degree of cohesion and direction to our advisory and education service. I am confident that it will succeed in providing a top-class back-up service to farmers. I have mentioned that we must improve productivity. This can be done by improving yields, the quality of grassland, husbandry methods and a general raising of standards in the whole range of farming activities. ACOT is the ideal organisation to inspire and initiate this transformation.
We have been hearing a great deal recently about the alleged need to reform the CAP. There is always scope for improvement and adjustment of such a comprehensive and complex policy as the CAP but I see no need for radical changes. The policy should go forward, not backwards. Forward progress would, of course, involve some improvements, such as eliminating the remaining monetary compensatory amounts and increasing the degree of preference on the market given to Community producers as against their competitors in the outside world.
The day-to-day management of Community markets is the responsibility of the Commission in Brussels. They are trying to carry out this formidable task in a prudent way within the limits of the financial resources available to them. It is right and understandable that they should do so. But there have been instances where undue restrictiveness about market management threatens to conflict with a basic objective of the Common Agricultural Policy, namely that of ensuring a fair standard of living for the agricultural community. In such instances the welfare of farmers and the need to maintain their incomes at a reasonable level should not be compromised by an over-cautious approach to market measures.
Those who demand basic changes in the Common Agricultural Policy are not thinking of progress. They are thinking rather of dismantling the CAP and reducing its impact to a point where it would no longer have any chance of fulfilling the tasks assigned to it by Treaty of Rome. Some opponents of the CAP are basically opponents of the whole idea of European integration. They would like to see agricultural spending shifted from the Community to the member states and indeed even a return to a cheap food policy based on imports from abroad. Much of this is wishful thinking. The days when Europe could exploit overseas agricultural exporting countries are over.
With the steady increase in world population the day may come when food productive capacity will be as valuable as oil resources. The opponents of the CAP conveniently ignore the effects the realisation of their aims would have in splitting the Community. Even more seriously, they ignore the integrity of the Community's achievements.
It would be very childish to assume that, if farm spending were to be re-nationalised, the free market for industrial goods could remain intact or the powers of the European institutions untouched. Those who seek to shake the pillars risk bringing down the roof; history would judge them harshly. The best interest of Europe—and of Ireland—demand that the wreckers be opposed. Of course, there are problems to be resolved in relation to CAP. Nobody denies that.
At present the inflexible upper limit of 1 per cent VAT contribution restricts the Community's total expenditure. That limit has become a serious barrier to the progress, and even the proper maintenance of the CAP. There is only one answer and that is to raise the expenditure ceiling, thereby providing for improvements in other Community policies as well. Amputation is not a response to growth. The Community's resources will have to be brought into line with its real needs and dimensions. Indeed, it would be irresponsible of us to set up a community of twelve without first having taken this essential action.
The resolution of the problem of Community resources will take some time. This factor will complicate the 1981 farmprice negotiations in Brussels, as it did this year. It is clear, however, that a substantial price rise will be needed to help Irish farmers to meet the income difficulties that many of them are experiencing. I will also want to see a significant cut in positive monetary compensatory amounts next year.
We in this country have adjusted the green rate for the Irish pound so that MCAs no longer apply on our side. But our exports to markets such as Germany and the United Kingdom are still subject to monetary charges in those countries which maintain green rates that are well below their market rates. This position has arisen because of the strength of their currencies and I would hope that as part of the price settlement there will be some worthwhile adjustment which will reduce the MCA charges on Irish exports to those countries.
The need to revise land policy to take account of current and future needs has been a preoccupation of the Government for some time. Changing circumstances in the agricultural sector, particularly since Ireland's accession to the EEC, have highlighted shortcomings in the present land settlement programme and have indicated a need for re-assessment of existing policy.
Preparation of a White Paper outlining the Government's thinking on the necessary reforms is at an advanced stage and I expect that publication can take place within the next few weeks. It is my intention to have discussions with all interested parties on the White Paper and to introduce legislation in the Dáil by the end of the year.
In conclusion I wish to underline once more that the Government fully appreciate the importance of agriculture. We are genuinely concerned with the current difficulties being experienced by farmers. We are very keen to find acceptable solutions to these problems. We have had high level discussions with farm leaders on the situation and we have announced a series of significant measures to provide relief.
The Government are keeping the situation under continuous review and assessing fully the various proposals for alleviating the difficulties. This is being done within the national and EEC context. The Government intend to match their concern for agriculture with as much action as is possible within their capacity. We share a desire with farmers and the agricultural industry as a whole to see agriculture develop and expand for the good of those directly concerned and the economy as a whole.