Dáil Éireann debate -
Tuesday, 9 Dec 1980

Vol. 325 No. 4

Private Members' Business. - Agricultural Income and Production: Motion.

Dr. FitzGerald

I move:

"That Dáil Éireann recognises, in view of the decline in agricultural incomes and production, that there is an urgent need for special measures to aid agriculture, resolves that the following measures shall be introduced to that end:—

(1) the abolition and refund of the Resource Tax.

(2) the repeal of the Bovine Disease Levy.

(3) the abolition of rates on agricultural land.

(4) the introduction of a capital allowance against income tax for breeding stock.

(5) an interest subsidy for certain farmers and

(6) the reduction of stamp duty on transfer of agricultural property to young farmers and

therefore provides that, notwithstanding anything contained in Standing Order 119 (1) of the Standing Orders relative to Public Business or any decision made thereunder, a second reading shall be given to the Agricultural (Emergency Provisions) Bill, 1980 as presented.".

I am moving this motion after consultation with my colleagues because of the extreme gravity of the national emergency that exists arising from the situation in agriculture. We are not talking here of a sectoral problem or a sectional interest but of something which is of national importance. Having throughout my career over the last 25 years since the EEC was established looked on it as the means of this country getting out from under economic dependence on Britain and its cheap food policy and having dedicated myself to securing EEC membership for this country because of the possible benefits for agriculture. I am anxious to contribute to this debate and emphasise in doing so the gravity of the situation as we see it. I believe it is seen in a similar way by the nation as a whole. I am not speaking alone for the party but for the whole country. I am sure that most of what I have to say will be shared by Members on the Government side although on some points of criticism of the Government they will naturally wish to demur.

The policy of joining the Community as full members, which I was engaged in from an early stage when I first helped to sound out unofficially from the Government of the day the possibility of full membership in April 1961, is one which proved its worth in the seventies. From the time when membership became a probability in 1971 to 1978, apart from a brief dip in 1974 because of the temporary world cattle surplus, Irish agriculture benefited to an extraordinary degree from membership of the Community. During that period of seven years the purchasing power of income arising in agriculture rose over 70 per cent. In that period farm incomes rose four-and-a-quarter times, far beyond even the massive increase in consumer prices that occurred during the oil crisis. In 1980 farm incomes are back well below the 1972 level in terms of their purchasing power. In fact, they are almost down to the 1971 level. There is every indication that next year, unless there is a major intervention by the Government, hopefully with the co-operation of the EEC, the purchasing power of farm incomes will be below that of 1971 with farm output falling, as it is at present, bringing incomes down in money terms even if there is a significant price increase.

Before we consider what measures should be taken to deal with the situation it is worth considering why it has happened. There is some confusion in people's minds about this. A factor in the situation is the EEC farm price situation but it is not that the prices have fallen. The reality is — I have just checked the latest agricultural price index figure for the month of September — that over the two years. September to September, there was no change in farm prices. There has been a failure of farm prices to rise for the Irish farmer because of the small increases in the EEC some of which have been eroded as far as we are concerned by special factors including the effects of the measures taken in regard to dairy production. The problem as far as prices are concerned is not that they have fallen but that they have not risen. The fact is that two-thirds of the drop in the purchasing power of farm incomes is accounted for by the increase in consumer prices eating into this purchasing power and one-third is due to the drop in farm incomes.

When one comes to analysing why there has been a drop in income one finds that it is not because farm output has fallen. On the contrary over the two years, from the figures available in the Central Bank Bulletin, there appears to be no change in gross output and a small increase of 2 per cent in net output over that period. The drop in incomes is not due to a fall in output but to the very rapid increase in the price of inputs which have risen by 30 per cent in the last two years. Once again, inflation. What we have is a situation where farmers are squeezed by inflation at both ends. They must face inflation which eats into the purchasing power of incomes derived from static prices and are at the same time eroded by the fact that they have to pay more for their inputs. That has the effect of discouraging them from buying inputs and using fertiliser.

Almost all of the farm problem, therefor, is due to inflation when one analyses the situation and most of that inflation it has to be said — perhaps three-quarters —is our own fault and is due to domestic causes. Any analysis of inflation has to give a certain amount of consideration to the effect of oil prices and other import prices. When one looks at inflation over the last couple of years it is clear that much the greater part of it is due to our own domestic policies, the increase in taxes and cuts in subsidies made necessary by the cost of the Fianna Fáil manifesto and by the large pay settlements that resulted from the price increases brought about by budgetary action and which are now running at double the level they were running at in 1977. The Government must accept a primary share of the responsibility for this situation. It is not primarily due to the EEC although it would have been helpful if EEC farm prices had risen over the period more rapidly than they did. The primary problem is inflation at home rather than the EEC situation.

In addition the Government have chosen during those two crucial years of unparallelled difficulty for farmers to make the whole situation worse by such measures as the 2 per cent levy, the resource tax — both of which were payable regardless of whether there was any farm income out of which to pay them — the imposition of a disease eradication levy — the more a farmer sold the more a farmer had to pay — and by the elimination of rates relief on small to middle sized farms. It is significant of the extent that the Government were out of touch with reality in regard to the farming situation throughout that period that even when they saw the damage done by the levy and were forced to pull back from it they insisted on substituting for it another tax, also unrelated to income, the resource tax. That action was taken at a time when the adverse trend in farming was evident to anybody who knew anything about Irish agriculture. It is hard to believe that any Government could have acted with such gross irresponsibility towards agriculture or that even today that the Government would fail to face reality.

When one reads the complacent terms of the Government amendment to our motion one is forced to have grave doubts as to the capacity of the Government to see something that is staring them straight in the face. What does their amendment do? It recognises that farmers generally have been experiencing serious difficulties. It welcomes the consultations that are taking place between the Government and farming organisations — so do we. It applauds — it is rather a strong word. I would have thought, for what is involved — the range of financial and other measures already introduced by the Government to relieve the difficulties being experienced by farmers. I would not have thought that the measures involved merit the word "range" and I would have thought that "applaud" is a somewhat strong verb to use in relation to them. It acknowledges that these measures will encourage investment and improve farm incomes. The measures are, of course, grossly inadequate to do either of those things as anybody who knows anything about agriculture knows. It says that they provide a stimulus for agricultural production when in fact these measures are so inadequate that agricultural production is bound to fall because of the destocking that is taking place at the moment and the reduction in the use of fertilisers on the land. It goes on to note that the Government are continuing to explore ways and means of assisting the farming community and promoting the expansion of agricultural output. It is not a question of promoting the expansion of agricultural output at this stage; it is a question of trying to stop the rot, to halt the decline in output which is looming up ahead of us not just for one year but for several years ahead.

The whole of that amendment reeks with complacency and of a failure to face reality. What we have to face, all of us in this House, however inconvenient it is — and as a party which is seeking Government and hopes to be in Government before very long it is as inconvenient for us in prospect as it is for the Government today because we will face the consequences of what is happening now if we are in Government, as we could be in months — is that if the farmers of 1980 were to have the same purchasing power as in 1978 they would need to have a family farm income of £1,216 million as against £895 million in 1978 just to stand still in terms of purchasing power because in that period this Government have managed to push the cost of living up by 34 per cent. Rather, to be fair to them, they have contributed the greater part of the 34 per cent increase in the cost of living that has taken place in the last two years. But family farm income in 1980 is not going to be £1,216 million. The figure estimated by the ESRI is in fact £755 million. That is a shortfall of £461 million compared with what they would need to stand still and have the same purchasing power as two years ago, never mind being better off, never mind having the capacity to invest in increased output. The Central Bank have similar figures. They are slightly different but as far as I could calculate from their figures they see the shortfall of farm income as £479 million. Whether it is £461 million or £479 million it is of that magnitude. Those two bodies have independently arrived at these figures and, in terms of income by comparison with what they need to have the same income and no more than in 1978, the farmers are short of £461 million to £479 million. That is the measure of the crisis we face today and those figures are ones which can be calculated by the Minister himself from the Central Bank bulletin and the ESRI report if he is prepared to do a little simple arithmetic.

This is not just a question of hardship for farmers. What we are talking about is not just a social problem, people being hard up and facing financial difficulties. Farmers are used to facing financial difficulties. They have had their ups and downs — more downs than ups here in the past sixty years. Others in the community too have faced downs as well as ups. Many of us had a difficult time in having to face the problem of a drop in income — I faced it twice in my own life. But we are not concerned here simply with a drop in income because it imposes a hardship on people. That is certainly something this House must consider. But if people are entrepreneurs — and farmers are entrepreneurs — there are bound to be downs as well as ups and they cannot expect and do not expect to be baled out every time there is a dip in income after a period of income at a higher level. What we are talking about here goes far beyond the hardship of not being able to buy a new car, the hardship of not being able to buy new clothes for Christmas or something like that. We are talking about something fundamental to the continuing output of the farming community. We are talking about something which affects the output of our whole country, employment here, the whole of our economy. There is the drop in the input of fertiliser arising from the increase in prices, in lack of farm incomes and there is the sale for slaughter of cows in-calf happening on a massive scale with one meat factory two months ago claiming that 60 per cent of the animals going through were cows in calf. This is ensuring a drop in farm output not just for next year but for several years ahead. Farmers cannot survive the pressures they are meeting from the banks and hold on to their farms unless they allow their farms and stock to be run down disastrously and that is what is happening at present. That is not just something which is bad for them; it is bad for us, bad for the whole community and the scale of it is alarming.

We can see production falling in different areas. Milk production for example looks like being down 2 to 3 per cent this year. Elsewhere in the EEC it is rising. Indeed a figure of 4 per cent has been mentioned but I think that may be on the high side. Let us ask ourselves why it is falling here in this country with its clear comparative advantage in milk production, a country in which we always believed or had good reason to believe that under conditions of fair and free competition — if we could only get such conditions — the comparative advantage of our farmers in milk production would lead to a rapidly rising output, an expanding share in the total Community market. All we needed to be given was conditions of fair and free competition. Yet in this year the output of milk is falling here when it is rising in the rest of the Community. Surely we must ask ourselves why that is happening. Surely we must be concerned that it should be happening against all the tide of probability, against all that any of us predicted or foresaw would be likely to happen.

It is not just a question of milk. The national cow herd is seriously on the decline. The level of destocking this year is estimated by one authorative source at 300,000. That would be valued at about £120 million at farm gate prices. At export prices, allowing for added value in the case of beef and some added value in terms of getting the livestock to the ports to be exported live, it is probably £140 million. In other words, our balance of payments deficit this year is being held down to the tune of £140 million by de-stocking of livestock. The figure of £550 million balance of payments deficit of which the Taoiseach was boasting in this House is in reality a figure of about £700 million. It would be that but for the de-stocking, the selling off of our herd which, in the ordinary way, we would be keeping to sell next year and much of which at the moment consists of breeding stock. The real balance of payments situation, so far as that goes, is of the order of £700 million instead of £550 million. Let me add, although it is not particularly relevant to this debate, that were it not for the fact that the Government have got the economy so depressed that imports generally are falling by 7 per cent this year, the balance of payments deficit would be another £400 million higher at £1,100 million; if we just had no increase in imports, if we had had stagnation in imports as we had in the economy, if we had no destocking, it would be a deficit of £1,100 million.

Mr. O'Kennedy

If.

Mr. L'Estrange

If the Minister had not voted for Deputy Haughey he would not be going to Europe.

Mr. O'Kennedy

That is about what I would expect from Deputy L'Estrange.

Dr. FitzGerald

If the Minister would stop interrupting——

An Leas-Cheann Comhairle

Will Deputy L'Estrange and the Minister stay quiet, please?

Mr. L'Estrange

The Minister interrupted first.

(Interruptions.)

An Leas-Cheann Comhairle

I look to all sides and I will keep all sides in order.

Mr. O'Kennedy

Deputy L'Estrange has made an unwarranted, ill-founded, totally untrue allegation against me and it says much more about him than it does about me.

An Leas-Cheann Comhairle

Let that finish that. We should have no personal abuse in the House.

Mr. Hussey

The Deputy should be asked to withdraw it.

Mr. O'Kennedy

I would not be bothered asking him to withdraw it.

Dr. FitzGerald

I would like to get on with my speech without any further interruption. This is a serious matter we are talking about and interruptions do not help. The Minister ought to know that and he should be able to control himself. Only because of a temporary running down of stocks affecting the level of imports into the country and the stocking of the cattle herd is our balance of payments deficit under £1,100 million. The failure of the Government to face that is one of the most worrying features of the situation at present. That is what should be on the Government's mind in the drawing up of the budget and on the Minister's mind in so far as he is still engaged in that activity.

Of that 300,000 de-stocking it is estimated that 70,000 more cows are being slaughtered this year than there were last year. Should the present pattern of cow disposal continue much longer cow numbers very soon will return to their pre-EEC level and this will make it impossible to maintain the level of agricultural output. This is dangerous for all of us and not just for farmers. We are not talking about sectional interests but about the national interest and this is widely realised. Early last year, due to the Government's mismanagement of farm tax proposals when feelings were running high outside the farming sector over the injustices of PAYE, there was a short period when an urban-rural rift appeared, something that I have always hoped would be avoided. The whole argument that I put forward in the EEC campaign was the mutual dependence of town and country and the multiplier effect of farm spending upon the urban areas. On looking back we realise that the reason why we survived the first oil crisis as well as we did was that we had a prosperous agriculture and the spending by farmers managed to see us through that difficult period. That rift which appeared momentarily was healed quickly when we all stood together on the platform in Nenagh. Deputy Cluskey, trade union and farming leaders and myself. Thank God we got over that difficulty.

At this moment the country — and by the country I mean the cities and towns as well as the countryside — recognises that there is a real agricultural crisis, not just farmers complaining about their lot. People see jobs disappearing, some in the food processing and farm machinery industries connected directly with farming and they see them disappearing in every sector with unemployment reaching unparalleled heights. They see that happening when farm spending, which helped us through that first oil crisis, has dropped like a stone. The interdependence of the farming sector and the rest, demonstrated positively in the mid-seventies when it kept us going, is now being demonstrated negatively in a way which has brought home to people that their jobs are in jeopardy because of the difficulty in the farming sector. That is why Fine Gael have brought forward proposals — recognising that these proposals will be costly and that the cupboard, due to the mismanagement of the Government is bare — to deal with the situation because the need is vital. We believe that EEC help should be secured to finance these proposals. I am glad that the Minister for Agriculture is looking for such aid and I hope that we will be told in plain language in this debate just what he is seeking. I am not clear as to what exactly is being sought. Perhaps due to a deficiency on my part I have not been able to get a clear picture of what he is seeking. We propose that he will seek assistance with the kind of programme which we set out in the Bill which we put before the House, but, to the extent by which the EEC aid falls short we shall have to find the money here and not by further borrowing. The money required will have to be found in the context of the Government's overall taxation expenditure plans for 1981. These measures appropriately are being put forward by us in advance of the completion of the 1981 expenditure Estimates. Even if in this context certain other expenditure programmes have to be curbed temporarily, this would be justified. That is essential in view of the emergency situation in this productive sector of our economy.

We chose to put forward our proposals in this matter by way of a Bill because we thought it most appropriate to do so, and that the more concrete we could make our proposals, the more specific and ready for legislative action they would be, the more likelihood there would be that they would produce some concrete results. The Bill was allowed to be printed, but for reasons which I do not understand and which I cannot believe are sound within the Standing Orders of this House, we were not allowed to proceed with the Bill although we had been given permission to print it. It seems to be suggested that remarks made in the presentation of the Bill made it out of order in the House although it had been in order before those remarks had been made. This is the most extraordinary contention ever put forward by the Chair of any parliament previously. Therefore, we are forced to submit our proposals by way of motion instead of by way of Bill. I regret this because the Bill in its complete form pinpointed the issues in the way they needed to be pinpointed.

Before coming to the individual proposals, with which I will deal very briefly given time, I want to make one general point about them. The aim of State intervention in agriculture should be to provide help in bad times while encouraging farmers to proceed on their own resources in the good times. Our present tax and grant structure does just the opposite. It gives more to farmers when the going is good and less when it is bad. In introducing this emergency Bill, now a motion, we are seeking to establish that when times are really bad and the structure of the whole agricultural sector is in danger, Dáil Éireann and the Government can and will provide the special aid to agriculture needed to put things right. We want agricultural policies that are a stabilising, counter-cyclical influence rather than the policies we have at present which tend to accentuate the slumps as well as the booms. Against that background our emergency proposals are put forward.

The first section of the Bill as we put it forward proposes the abolition of the resource tax and the refunding to farmers before 31 December of anything collected under that during this year. I do not need to dwell on this. Everybody knows that the tax should never have been introduced. At any time there were strong arguments against it. To introduce it in 1980 when farm incomes had already dropped so drastically in 1979 was extraordinarily irresponsible. The money should be refunded at this stage. It would provide some small assistance to farmers who have been deprived of this financial resource, this liquidity which they needed so badly.

Section 2 of the Bill would abolish the bovine disease levy. This levy is a tax on agricultural output to pay for disease eradication and it has the effect that the more one produces the more of this levy one is asked to pay. It is a penalty on production charged even on products sold at a loss and it has the same effect as the resource tax. This Government seem to spend a lot of time thinking up ingenious methods of taxing farmers so that they have to pay money even when incurring losses.

Section 3 of the Bill proposes the abolition of agricultural rates. Everyone is aware that our present rating system for agriculture is highly anachronistic. Even in the non-agricultural sector there are anachronisms as seen in the case of commercial and even private dwellings, although in the case of private dwellings the matter is no longer serious since they were derated. In agriculture this anachronistic system is based on the valuations of farms made in the mid-19th century when the factors which determined the value of farms were quite different from those of today. My great-grandfather was engaged in the valuation process and I doubt very much if he ever thought that the work he was doing would stand the test of time so well a century and a quarter later and that the valuations put on farms in the light of prevailing conditions would still stand.

One factor which determined the valuation of land was whether land was near the sea because at that time seaweed was the only fertiliser readily available. Therefore, land near the sea where seaweed was available was valued more highly. That is irrelevant today when fertilisers of another kind are normally used. Another factor which determined the value of land was whether it was near a navigable waterway. In the last few months in the midlands I have seen the banks of the Shannon, land which is under water in one instance for ten months of the year and in other instances for eight months of the year which is valued more highly than land elsewhere because of the value of having the Shannon navigation, steamboats going up and down the Shannon. Steam had just been invented at that time and it was thought that there was a great future on the Shannon for transport. The land there, of course, effectively is valueless. Virtually nothing can be grown on it during the brief period when it is above the waterline. To base any system of taxation on something as out of date and anachronistic as that is absurd and leaves gross inequity between farmers, some land being valued at twice or more the price of other land of equivalent productive capacity. Indeed, the system is being challenged in the courts at present and may well be found to be unconstitutional. Given the extent to which judges have brought questions of equity into their judgments on legislation in recent years it would not surprise me if it were found to be unconstitutional. To collect substantial sums of money on such a basis is unjust. It may not have mattered that much years ago, when the level of rates were low and the scale of the injustices were small, but today with rates at their present level injustice is on a large scale. The rates system takes no account of family circumstances, so a farmer with ten children pays as much as a single farmer. It is not related to the capacity to pay and as a form of taxation in that respect is unjust.

In good years when farmers have an income they may use their rates as an instalment off their income tax but in bad years when they have no income they have to pay their full rates without any relief. It represents a double injustice. It is singularly inequitable form of taxation which is not only unjust in a distributive sense as between the different people paying it but which imposes an additional penalty when incomes are low or nonexistent and losses are incurred. When there are profits they can be set in such a way against them so as to afford relief to farmers. It is a totally counterproductive tax in this respect. It does the exact opposite to what any tax or levy should do in agriculture. It hits farmers in bad times and helps them in good times. That is a good reason to remove it.

The section in the Bill being proposed provides that the revenue loss to local authorities by the non-collection of rates from farmers should be paid by the Exchequer in the same way as rates on houses are. The Exchequer already lays down the extent to which local authorities may increase rates in a given year because the Government seek to limit their own liability for domestic rates. It is unfortunate that we have this situation where the autonomy of local authorities is being undermined. This Bill involves no additional diminution of existing local authority powers because the Government are already exercising this control. There is a serious problem of local authority financial freedom and this will not add to the problem as it exists already but it is something which, in Government, we will have to look at.

Section 4 proposes to treat breeding stock as capital for income tax purposes. The present decline in the numbers of breeding stock is of crucial importance. Our cattle breeding herd is at its lowest level since before we joined the Community. We have a diminished capacity to produce cattle for export in the foreseeable future and this decline must be reversed. One way of doing so — it is only a small contribution but every little helps at this point — would be to allow farmers to set off the costs of purchasing or retaining extra breeding stock as a capital allowance against their income for tax purposes.

The farmers in greatest difficulty are those with high borrowing. Many young farmers borrowed heavily in recent years to expand their stock numbers, drain their land, modernise their farm and so on. In doing so they were acting according to the best official advice and often, in terms of development plans agreed with their agricultural adviser. Sometimes it is true they are pushed into it unwisely by banks or financial institutions.

One of the things I regret is the collapse of medium term economic planning in the country. It left us without a mechanism which would have helped foresee this problem. If anybody had sat down and looked at the way in which inflation and prices were likely to move over the years they would not have foreseen the scale of the present disaster but they would have foreseen the trend and in doing so would have provided guidance to farmers not to over invest or be pushed into borrowing too much during this period. The absence of any such medium term plan or any attempt to look ahead helped to produce this situation. These farmers find themselves in serious difficulties about repaying loans.

In order to give direct relief to these farmers our fifth proposal in the motion requires the Minister for Finance to prepare an interest subsidy scheme. It is envisaged that the subsidy would be paid, not to the bank, but directly to the farmer. It would be administered by the revenue commissioners on the basis of statements of interest supplied by farmers. These statements are already required for tax purposes and this would reduce the administrative cost. Detailed criteria would be drawn up to ensure that a subsidy would be payable only for genuine family farm development and only on loans up to £25,000 per borrower. This is one of the most important aspects of the Bill. I urge the Government in considering alternative ways of helping agriculture to pay particular attention to this area. The situation is extremely serious. Farmers are forced to let the land run down and sell their breeding stock. In some cases they are forced to contemplate selling their farm or part of it. It is a situation which no Government can allow to continue whatever the cost or however the money is found.

Deputies

Hear, hear.

Dr. FitzGerald

The problem has to be met. The Minister for Finance faces real difficulties and I sympathise with his task in preparing this budget. What I am proposing will not make it any easier for him, but he knows as well as I do that it is necessary and that something must give somewhere in order to deal with the problem.

The sixth proposal in the Fine Gael motion is designed to facilitate the transfer of land to trained young farmers. In order to encourage people who may be considering transferring land to young farmers to act now, we are proposing a two-year abolition of stamp duty on transfers of land to such farmers. This will apply to transfers within and outside the family. This is important and the two-year time limit is designed to encourage people to act now to ensure that a significant transfer of land would take place to younger hands so that in trying to come out of the present crisis as much land as possible would be in the hands of farmers with energy to tackle the problems.

Our proposals will fill only a small part of the gap in farm areas. I do not claim that they solve the problem. The scale of the problem is far larger — a deficit of between £460 million and £480 million in farm income. The cost of our proposals we estimate at £70 million. In some cases the benefit would be far beyond the actual cost to the Exchequer because it would make possible the avoidance of action which would cut income very much more next year and the year after. The multiplier effects of the £70 million we propose to be spent is considerable and the package was put together with that very much in mind. It is a package in the general public interest. I hope the Government will accept and implement the measures proposed here as soon as possible. The need is desperate, urgent and cannot be ignored. Whatever blunders the Government have made in the agricultural sector or elsewhere in the past two years, they must put those behind them and grapple with the problem. We have shown the way ahead in producing this Bill, not in the belief that we have all the wisdom available but that we are on the right lines. We have identified some of the more significant problems. We have picked out solutions which will have a multiplier effect in setting things right. While our proposals only go a small part of the way towards resolving the problem, they are an important first step.

I hope the Government see it in that light and that putting down the amendment is to be seen as no more than a temporary holding mechanism, because they have to sort themselves out and need time to decide on a particular course of action, and that it does not mean they will ignore the proposals but will take them seriously and that the package along the lines we propose will come forward in the near future.

I urge the Minister in respect of some of the proposals not to wait for the budget because the damage that will be done between now and the date of the budget will be considerable. If he could indicate that some proposals put forward here — for example, the interest subsidy — is under consideration by the Government even if he cannot commit himself to a particular figure or proposal, but anything of that kind which will restore confidence at present and persuade farmers to hold back on stock they would otherwise sell and encourage some farmers somewhere to put fertiliser on land which otherwise will not be productive next year. In that way there is a chance to save something from the wreckage, but very little time to do it in and no time to be wasted.

I hope that the Minister will not be put off doing any of these things because we propose them. They are all things that arise from common knowledge of the nature of the problems. Anybody sitting down to examine the problems would come up with a package along these lines. We suggest that what we have put forward is on the right lines and we urge the Government not to hesitate to act now decisively and to give new hope to the farming community before any more damage is done to a section upon which so much depends and on which the livelihood of all our people depends to a degree that I think is now widely appreciated, though not perhaps completely understood by everybody.

Minister for Finance (Mr. O'Kennedy)

I move amendment No. 1 in my name and in that of the Minister for Agriculture:

To delete all words after "That" and to substitute the following:

"Dáil Éireann recognises that farmers generally have been experiencing serious difficulties; welcomes the valuable consultations taking place between the Government and Farm Organisations in regard to these difficulties; applauds the range of financial and other measures already introduced by the Government to relieve the difficulties being experienced by farmers; acknowledges that these measures will encourage investment and improve farm incomes and provide a stimulus to agricultural production and notes that the Government are continuing to explore ways and means of further assisting the farming community and promoting the expansion of agricultural output."

First, it is important to note that there is one matter on which all sides of the House are agreed — perhaps more than one — that farming is going through a difficult period. Secondly, I think we are also agreed on the significance of farming in the economy and in the whole social and cultural structure of the country. Where we obviously disagree is in how we should approach the problems that exist, the implication from the motion being that the Government have not been concerned, have taken no effective action and are not now taking such action. I propose to demonstrate very clearly that not only have we taken effective action but that we are continuing to do so within the scope available and to the extent that the Government have the responsibility and obligation to do so.

By way of introduction I can say that we have demonstrated this in the various actions taken, in the consultations we have had which have been unprecedented in nature and scope and understanding between Government and farm leaders and also in the unprecedented discussions we have arranged between the farm leaders and the Revenue Commissioners among others. All this clearly shows that the Government in the past 12 months, and even on this very day and night through my colleagues in Europe, are aware, are concerned and are taking action.

The Opposition motion ignores all the actions taken. I propose to outline in some detail those actions from the first time within days of my taking on the responsibility of Minister for Finance when I met farmers in pre-budget meetings. Since then the Taoiseach, the Minister for Agriculture and myself individually and collectively have had very constant and very fruitful meetings with them. The motion ignores what has been achieved and the fact that actions already taken whether by way of tax concessions or by way of extra grants or moneys applied——

Dr. FitzGerald

Levies, resource tax?

An Leas-Cheann Comhairle

The Minister without interruption, please.

Mr. O'Kennedy

I used one and I regretted it because it involved an unwarranted but typical interruption from Deputy L'Estrange. I used one word "if" three times and so, if the Deputy would allow me to continue I hope I shall not give rise to any typical chorus from Deputy L'Estrange. He may say what he wishes but I shall stand on my character——

Mr. L'Estrange

If you do not deserve them you will not get them.

An Leas-Cheann Comhairle

The type of personal abuse we have been having is not good enough.

Mr. O'Kennedy

——in the face of these unwarranted attacks. He merely added to the accumulated total this evening. Action we have taken by way of grants, incentive grants and tax concessions already represents over £80 million in this year in addition to what was being done. This will enable Deputies opposite, if and as they wish, to suggest that there was another slippage in the borrowing requirements because it appears on the current budget. Deputy FitzGerald, particularly, will be conscious that these have been deliberate Government actions. Deputies opposite should bear this in mind when they come, as they undoubtedly will, to criticise what they will refer to as "slippage". The Minister for Agriculture will deal in detail with actions taken by him.

The Government are particularly conscious of the problems that have occurred particularly in the past year for the developing and development farmers, those who invested in their future and in the country's future. Because of the nature and level of their development, obviously the repayment requirements of the banks, the ACC or other lending agencies have been a problem in a period when interest rates were running very high. We took direct action to help that very important section of the community. Because of high interest rates particularly becoming a burden on those farmers we took action by way of raising loans guaranteeing the exchange rate for the ACC and the banks, such action being unprecedented in anything done here or elsewhere. If Deputies opposite can give me any example of commercial banks having a guaranteed exchange cover by a Government in respect of loans they raise to pass on to any section they will turn up something I have not become aware of in my consideration of the matter. That is one example of what we have done. As a consequence of Government action in this area the House will have noticed that interest rates have reduced very considerably. In passing, may I say that a comment made recently in a statement by Deputy Cluskey in which he said that interest rates in Ireland were the highest or among the highest in Europe is not correct. The reality is that now and for some time, much as a result of direct Government action, interest rates in Ireland are the third lowest in the EEC. That has particular significance for farmers.

In view of the farmers' difficulties — they did face losses — we met the banks and told them that because their interests and the national interest depended so much on the success of farmers that when the farmers are in difficulties the banks must share some of the difficulties and if the farmers had losses the banks should share them also. It was not just in the interest of the banks that we guaranteed £50 million extra by way of special loans at concessional rates for farmers: it was for farmers. The banks agreed with the Government to share losses, to restructure loans and they guaranteed that this would be done and be seen to be done. Both they and the ACC have established liaison committees at our suggestion with farm organisations so as clearly to show that things would be done. From reports coming back from these liaison committees — I can speak directly about the ACC because they have immediate responsibility to me — I find that 97 per cent of the cases referred to them in respect of restructuring have been dealt with satisfactorily. There will be 3 per cent in the best of times, never mind the worst, where farmers will perhaps use loans to buy land at too high a rate or sometimes buy land on loans made available for something else. One cannot cope with all of them all the time but that record speaks for itself. The ACC go through each case for restructuring, case by case, with the expertise available to them in the district office. A special team has been established in the ACC since this scheme was launched to review every one that may have been turned down at the initial level by the local district office. I — in so far as it is my responsibility — and the Minister for Agriculture, have been in constant contact with the ACC in relation to restructuring the loans, which was one of the purposes of the allocations we applied to them. It is very significant that we remain in constant contact. Where, perhaps, the original conditions in applying the Euro loans might appear to be somewhat restrictive because we were concerned that they would be used for new development loans to maintain the output that is so important to agriculture, where some of these conditions are restrictive we hope and expect we will be able to relax them. No one pretends that there is an immediate prescription but we are taking a very flexible, tolerant and reasonable approach, because the real purpose now is to restore confidence in what is a difficult period.

Mr. Bruton

May I ask a question?

Mr. O'Kennedy

The Deputy can ask in his own time. Normally, the operating margin that the ACC are expected to achieve, because they too have an obligation to balance their books, is of the order of 4 per cent. The ACC operate on a margin of 2½ per cent which represents — if you want so to call it — a loss of £¾ million to them and that is something the Exchequer are prepared to take on board.

There has been a much greater reduction in the rates on the seasonal loans advanced to farmers through this period than on the rates to depositors with the ACC, at considerable cost either to them or to the Exchequer as the residual guarantor. The ACC are passing on the benefit of the moneys, which we arranged on this unprecedented move they would raise, in Euro currencies to the people for whom they were intended. If there are difficulties in respect of existing loans, raised before these arrangements were made, we will encourage the ACC, within the obvious criteria, restrictions and disciplines that apply to any lending institution, even one which is backed by State resources, to be flexible. I wish to pay tribute to the people in that organisation and also to the understanding that developed with the farmers in the liaison committee. They, with the expertise they have, are working daily and I, who live amongst them as most Deputies on the other side do also, know what is happening in district offices. I do not have to be told from any side of the House, apart from the experience I have as Minister for Finance, what is happening in that area.

The last thing the Government want to see is a cut-back by farmers on essential fertilisers and selling breeding stock. Not only would that be against their interests, but it would be damaging to the banks and the ACC if they were obliged to do this because of commitments they had entered into. It would be a major blow to the economy of which they represent such an important part. I want to say, very deliberately, that farmers who feel they are obliged to take action of that sort should now note, because we have said it more than once, that they are not so obliged. If any local bank is pressing action of that sort which would inhibit development—and I do not believe they would—farmers do not have to take those negative, counterproductive actions, because that is what these liaison committees are for. Fertilisers and breeding stocks are essential, not just for the farmers but for the banks, the ACC and the economy. No one would benefit if that were to continue.

Deputy Hegarty seemed to think I was concentrating too much on the ACC. I will give some examples of precise actions. This year, in relation to the farm modernisation grants, which is a matter specifically for the Government but the Minister for Finance has to face the criticism for the slippage in his borrowing requirements, we took a deliberate decision to increase from £36½ million to £59 million the amounts made available for farm modernisation grants. At a time when people are talking about doom and gloom—and I recognise there are difficulties—would they, for goodness sake, sit up and take notice of the fact that the level of activity of these grants, which I presume the farmers are not spending on fridges, are more buoyant than at any time in the history of the State. This year £60 million compares with a total of £160 million since 1976. Is that evidence of total depression? It is evidence of determination and confidence and it is evidence to everyone of the reaction of the Government where in this year alone we have taken that unprecedented step.

The Minister for Agriculture will deal with other aspects but I will give examples of the cost in relation to the disadvantaged area schemes. Annual expenditure will increase by approximately £17 million. Note that figure. The Government did not take that on lightly at what is—as Deputies opposite know—a difficult time. This year it will be £10.6 million. In a full year it will be £17 million.

We have also had the introduction of beef suckler schemes, whereby the grant of £13.18 is financed by the EEC on cows and beef suckler herds and a further £12 out of national funds, making a total of £25.18 which would, in respect of disadvantaged areas, bring the total to £57.18 in respect of each additional cow in the disadvantaged areas. We introduced a fertiliser usage and first time silage scheme, as Deputies will be aware, at the request of the farmers, which applies to almost each case. I hope I have time to refer to this. This cost £1 million. There were also Exchequer grants to maintain the cost of warble fly dressing at the levy which applied in 1979. I will refer to the cost of this shortly. I think Deputy Bruton thinks it is a source of amusement.

Mr. Bruton

It is like Marie Antoinette telling the Parisians to eat cake.

Mr. O'Kennedy

It represents close on £40 million which is almost 30 per cent of that which otherwise this year would have gone directly to the farmers' pockets by way of Government action. That is how significant, unprecedented in scale, scope and extent the actions we have taken over the last few months have been, as a consequence of our concern and the consultations we had with farmers. We have had these consultations and we have met the requests that have been made to us. The farmers wanted immediate funds—I do not think that this is unreasonable from their point of view—to restore their incomes, something in the order of £300 million. I do not think even the Opposition would expect that to be done quite like this. We met each issue the farmers raised during the course of these very satisfactory consultations. There may be one or two in principle which still remain. This started in my pre-budget meeting on 4 February and the first thing I told them was that I would not be insisting on the yield which had been determined of £100 million. That £100 million that looked like coming up last year will, in fact, be approximately half that, a total yield from income tax, resource tax and rates, of about £50 million. That is a consequence of a number of the actions, not all of them due to a fall in farm incomes, which the Government took in the area of income tax and rates. The yield from income tax in the-last one and a half years represents a reduction of £25 million. I told the House earlier about the other part of the story. We in this Government have been tailoring our budgets to what we expect the realities to be.

Mr. Bruton

The Minister is being illogical.

Mr. O'Kennedy

The Minister for Agriculture has met the farmers several times. I have met them several times. I met their leaders on 14 April. We met them in July, and on 17 October the Minister for Agriculture and I met them. At the April meeting we discussed taxation and related matters. In June I met the farm leaders, with the Minister for the Environment, and we discussed rates and other such matters. We have made concessions. On 9 September Deputies will be aware that the Taoiseach, the Minister for Agriculture and I met them. On 17 October I met them again. On 8 July the Taoiseach and the Minister for Agriculture met them—I was not present on that occasion. On 21 August, 12 September, 17 October and 27 November we had discussions with the farmers' leaders. Deputy FitzGerald made a virtue of turning up in my home town to demonstrate his interest in Nenagh in the farmers' problems. He would have done better to have spent a little more time with them than on a platform in Nenagh.

Dr. FitzGerald

I have visited all constituencies throughout the country.

Mr. O'Kennedy

I am sure the Deputy learned a lot, as he did from his cursory visit to Nenagh.

An Leas-Cheann Comhairle

Deputies should cease interrupting the Minister. He has a very limited time.

Mr. O'Kennedy

We heard the Deputy's references to some of the things he noticed recently about flooding and things of that sort. Some of us do not need to pick up this information from what we have seen in the past month or two. Some of us feel obliged to spend our time with them.

Dr. FitzGerald

What has the Minister been doing about it?

An Leas-Cheann Comhairle

The Deputy should cease interrupting.

Mr. O'Kennedy

Some of us have been reared among them. All our relations are part of them. I have been referring to the actions we have being taking and the concessions we have made. All of this cannot solve the problems because, as even Deputies opposite will appreciate, as the farmers' leaders appreciate, that the real problem is not here, apart from the climatic conditions we have had this year. The problem is related to the CAP and its significance for farmers and the whole price structure. That is the main element. Yesterday and this evening and in the last number of weeks the Minister for Agriculture has been and is in direct consultation on these matters. These consultations are continuing and we do not know yet what will emerge from them.

However, the farmers are well aware that the Minister for Agriculture is making a determined effort on their behalf. It is important that all of us in the Government should do this because 31 per cent of our total exports in 1979 came from the agricultural sector. That is not the full story. The 31 per cent amounted to £1,089 million. To that can be added receipts from the EEC Agriculture Fund which brought a further £415 million. Then we can understand the significance of the farmers' contribution to our balance of payments.

I hope it is clear from what I said earlier that I do not take solace from that contribution to our balance of payments, which is being corrected, and to our inflation, which is not running at the rate Deputy FitzGerald so confidently forecast it would be at budget time, 21 per cent or 22 per cent. Our balance of payments position is better, the inflation rate is working out better, but I do not want to see the considerable improvement in the balance of payment coming about at the expense of the slaughter of our breeding stock. That is the last thing I want to see and that is why I made my statement here earlier in relation to the roles of the financial institutions and the ACC.

Those who preach gloom should realise the damage they do in a difficult time. The important thing is that farmers should feel encouraged by every action the Government are taking. These actions should be supported and promoted by all political representatives. Farmers should be encouraged to increase production. Through the loans that we are continuing to apply, by way of exchange risk guarantees particularly, we will minimise the situation. Through these measures interest rates here now are 4 or 5 per cent less than they would otherwise be. Were it not for the actions we have taken the interest rates would not have moved down to 3 or 4 points below those in Britain. Direct Government action was responsible through the Central Bank. People do not want to give us credit for that.

Mr. O'Toole

The farmers do not, anyway.

Mr. O'Kennedy

Not if they listen to all the moaning and groaning the Deputy has been giving them.

Mr. O'Toole

What about Limerick last Saturday?

Mr. O'Kennedy

We want to ensure that farmers will increase production.

Mr. Bruton

The Minister has not spoken on the motion so far.

Mr. O'Kennedy

The Minister for Agriculture will be speaking on these matters.

Dr. FitzGerald

The Minister is afraid to speak on the motion.

Mr. O'Kennedy

I like to give positive views rather than reactionary opinions, which is what the Deputy has been at. Deputy FitzGerald is known to be garrulous. While he was speaking I interrupted him only once to use the word "if". I got a response from Deputy L'Estrange which was typical of him. We cannot expect Deputy FitzGerald to sit quiet for the three minutes I have left. The operation of the CAP is vital in this. We did not join a common market. We joined the European Economic Community in which the common agriculture policy played a central part.

That is what we will promote at European and every other level in every institution. Any attacks on the CAP or any undermining of its role will be resisted by us. Ireland has played no mean role in the EEC and we will not have anyone undermine that role. As well, we are aware that farmers play no mean role here and we are determined to ensure by all the actions we take that the Community will recognise as we do that the CAP is a vital element in our economic success, in our programming for the future.

Because of the number of meetings I have had with our farmers, indeed long before those meetings, I am especially conscious of the role of the agricultural sector in keeping our economy going through difficult times. We have a commitment to those who have commitments to us, not because of their economic significance but because of what they represent in value terms to this country, social and cultural values. Without a buoyant, prosperous farming community we would be a different country.

Even today I have taken action to ensure through the EIB that we will further develop agricultural activity, because today I arranged for further loans from the EIB amounting to £17.5 million to be made available to the ICC and the ACC for lending to small and medium manufacturing and agri-business firms. As I said earlier, we have met the farm leaders, we have worked with them, we have listened to them, we appreciate their problems and we respect them for the way in which they have consulted with us. I believe they respect us. They may have pressures which are not all due to the difficulties that farming is going through. There may be other pressures on them. It has been a privilege for me to work closely with those people. I assure them that the Government will continue to take effective action at home and abroad to maximise the benefit of agriculture to our economy.

Mr. Bermingham

The motion before the House states:

That Dáil Éireann recognises, in view of the decline in agricultural incomes and production, that there is an urgent need for special measures to aid agriculture,

It has become apparent to everybody including the Minister for Finance that the farming community have problems. The first words of the Minister's amendment state:

Dáil Éireann recognises that farmers generally have been experiencing serious difficulty...

Both sides are apparently agreed on that. My party certainly agree with it. Anybody who disagrees about the serious difficulties which the agricultural community are experiencing at the moment must be unacquainted with the area. The Minister could have fooled me when he said that he had full co-operation from the farmers, that they understood him and he understood them and everything was very well. I come from a farming area, I have a farming background and I know that what the Minister is saying is not the truth. I do not mean to imply that he wishes to say an untruth but he is apparently misled because the farming community are saying the Government are doing nothing in their favour. The Minister is fooling himself if he continues saying that the farming organisations understand him and he understands them. I fail to see how any Minister for Finance can stand up and say that the measures the Government are taking at the moment are practical.

It was principally the farming community who ensured that we joined the EEC, with the two major parties in the House. The farmers campaigned for our entry into the EEC on the basis that they would get the same prices as our European partners. Our farmers want to be able to sell their products at the prices obtaining in Europe.

The two previous speakers said that farming is our chief national asset. We know now after eight years in the EEC that our agricultural produce is not commanding the same price as that of our European partners. The Minister for Agriculture stated last week he was going to Europe to try to negotiate that our agricultural produce would get the same prices in Europe as our competitors. It is not to the credit of any Government to have to admit that they are only doing that now. Our meat and dairy products are not obtaining the same price as the European farmers are getting. Our farmers are thus at a serious disadvantage even before we start talking about inflation or anything else. The feeding stuffs for our cows and all the other inputs to agriculture are costing our farmers a lot of money. In fact, they are treble what the European farmers have to pay. The reasons the farmers backed our entry into the EEC was because of the common agricultural policy which should mean equal returns to all members of the Community.

I know that our marketing is not built up enough to get the prices we should be getting for our produce. We have the land to produce the best in meat, dairy products and vegetables but we find that we are not able to compete. I believe the responsibility must rest on the Department of Agriculture and the Minister because no attempt has been made to produce the type of marketing to ensure that our produce can be sold for the highest prices available in the European Community.

We have an inflation rate which does not favour our farmers in keeping their costs down. The inputs to agriculture increased over the last year by around 30 per cent. Our rate of inflation has added to the problem. Because we are accepting a lower price, the profit available to our farmers is well below that available to farmers in Europe. There are small farmers as well as large farmers in County Kildare. Many of those small farmers, on the advice of instructors, have borrowed money to build milk parlours to try to increase their incomes and the production from their farms. These people are under pressure from banks and other institutions to repay that money but they are not in a position to repay it. Recently I made representations on behalf of five small farmers to the Eastern Health Board. Their situation was so bad that they found it necessary to have recourse to the health board for what is known as sustenance. If the Minister doubts what I am saying, I can produce the details. These are people who have been trying to make a living from their small farms and who have been trying to build up dairy herds on very small amounts of land, some of which may have been bought at very high prices. It is not enough for the Government to say that the banks will not put pressure on such people for repayments because even if, say, a five-year loan is extended to 20 years, the interest will be so great that the farmers will never be able to come to grips with it.

I am glad that the Minister for Finance has intervened in this debate. I would say to him in particular that unless the Government can subsidise the interest on these loans, there is no point in saying that pressure for repayment is being eased. We must subsidise the interest until such time as the problems of the farming community are resolved. There is no denying the difficulties in the agricultural sector.

Mr. Bruton

Hear, hear.

Mr. Bermingham

Surely after almost a decade of EEC membership we should be receiving similar prices for our produce as are being paid to our competitors but that is not the case. There is talk of capital being restructured but what is most important is that there is brought about a levelling-up of prices. Inflation rates have been levelled up and we find that our cost of living generally is higher than is the case in the rest of Europe. However, our farmers continue to receive lower prices for their produce than is the case in the rest of Europe. Can the Minister for Agriculture tell us the reason for this situation? The Government tell us about all they have done for agriculture but I venture to say that what they have done in this sphere amounts to very little. The farmers were grateful for small mercies but the time has come when something must be done to help them in their present difficulties. I should like to hear during this debate from those people on the Government side who know very well what the situation in agriculture is. In particular I should like to hear from Deputy Callanan regarding the small farmers in his area, farmers whose problems are similar to those of the small farmer in Kildare. I would remind the House that, despite general belief, there are small farmers in Kildare, some of whom owe substantial amounts of money to the banks and to other financial institutions but who realise that, even if the terms of their loans are extended, they will not be in a position to keep up with the interest repayments. There is some poor quality land in Kildare, too. Many of the small farmers I am talking of borrowed when interest rates were of the order of 10 per cent but they are now repaying at rates that vary from 16 to 19 per cent.

There must be a levelling-up of incomes right across the board in the EEC. Our farmers should be receiving as much for their produce as are the French, German or Dutch farmers. Life in the EEC is supposed to be all about equality but how can there be equality when there are such differences in price structure as between one part of the Community and another? The situation in respect of farm prices is difficult to understand when our cost of living is probably the highest in Europe. I understand that there are moves in France to help the small farmers there, particularly those whose land is bad. The idea is to put these small farmers on an equal footing with the rest of the people. I suppose that if we suggested something similar here, we would be told that any such action would be against the rules of EEC membership but we must be prepared to stand up and be counted and to be serious when we talk about agriculture.

If the problems in the agricultural sector are not resolved, not only cow herds but land itself will have to be sold off in order that farmers may meet their mortgage repayments and these are debts which they incurred on all the advice available to them, from the Minister for Agriculture and from the agricultural advisers. In addition, the banks were willing to lend money to buy land which we all knew was too dear.

Debate adjourned.

The Dáil adjourned at 8.30 p.m. until 10.30 a.m. on Wednesday, 10 December 1980.