I move:
That Dáil Éireann:—
—notes that the EEC Council of Ministers has reached decisions in regard to agricultural prices for 1981/82 and related measures;
—expresses its satisfaction that the decisions represent an average increase of over 13% in Irish support prices and include a package of special measures for Ireland, and
—welcomes the significant contribution which the Council's decisions and the measures already taken by the Government will make to improving farm income in Ireland and furthering the development of Irish agriculture."
Agriculture serves all our people, not just the farmers who depend on it for a living, but everyone in the country, particularly those working in the food industry and in the industries supplying the farmers' needs; also the consumers who expect a constant supply of high quality food at reasonable prices.
It is not always easy to reconcile the interests of these various groups but it is important that we recognise the common interest we all have in realising the full potential of Irish agriculture. The achievement of a realistic rate of expansion in agriculture is not just a matter for the Government. It is an objective of major significance to us all. In the development of our economy in recent years, the farming sector has been an area of particular concern to the Government. The problems which farmers have had to face have been fully recognised by the Government and we have spared no efforts to find adequate solutions.
There are three sources of possible help to farmers to raise their incomes and achieve real improvements in agricultural output. Each of them is vitally important. These three sources are the EEC, the Exchequer and the Farmers themselves. Let me say straight away that anyone who would disregard one of these three areas of responsibility is not being realistic in today's circumstances. It is only through concerted action on all three fronts that we will see farming achieve worthwhile growth.
I should like, first of all, to deal with help from the EEC. Before dealing with last week's Brussels decisions in detail, however, it is desirable to look at the background against which the discussions in the Council of Ministers took place. For some time now a number of member states have been seriously concerned about the state of the Community's finances and, in particular, about the large share of the budget spent on the common agricultural policy, not to mention the budgetary impact of increasing that expenditure. As is well known, the upper limit of the Community budget is fixed by the maximum contribution of 1 per cent of each country's VAT base. This is not a limitation which Ireland favours. We consider that it operates to prevent the proper development of the Community, the achievement of economic and social convergence and the introduction of new policies. However, some member states refuse absolutely to raise the limit at present and so it may be with us for some time to come. The Community's expenditure, in which agriculture of course plays a large part, is at present within the limit.
Some member states are putting forward suggestions which would seriously reduce the scope or impact of the common agricultural policy and for products of major interest to this country. I have resisted such proposals in the past and I again resisted them on this occasion.
At present, the Commission, in the context of a mandate given to it by the Council, is looking into the question of restructuring the Community budget. While this restructuring is not to question the fundamental principles of the common agricultural policy, a number of member states see the curtailment of expenditure on agriculture and a reduction in the Community budget devoted to FEOGA as a basic ingredient of this exercise.
Such a restriction on Community spending on agriculture would not be in the long-term interests of the CAP. It could eventually bring the CAP to the point where it could not fulfil the role assigned to it by the treaty. It is very much in Ireland's interests that such a line should be opposed.
Also in the background were two other major factors. One was the strong pressure from what I might call the southern member states to increase the share of Community agricultural expenditure allocated to their particular products. While some movement in that direction may be justified on economic, social or other grounds, the overall pressure on total Community expenditure means that increased support for products such as olive oil, tobacco and wine could make it more difficult to preserve or obtain the necessary support for products of major interest to us.
The other major background factor was the concept of co-responsibility. The Commission was again putting forward a super-levy as one of the main co-responsibility instruments in the milk sector. This is a most objectionable proposal for this country because it would impose a penal levy on increases in milk production and so would have the effect of freezing our milk production at its present level, For cereals, the Commission proposed applying co-responsibility by means of deferring payment of part of the intervention prices, a method open to considerable objections. Faced with the huge task of day-to-day market management in the Community and the desire of some member states to curtail spending on agriculture, the Commission can argue that co-responsibility measures are necessary, at least at times. But the co-responsibility concept should not become a permanent principle of the common agricultural policy. Neither should it be applied in a way that would discriminate unfairly against a country or a region.
Those then were the difficult background elements when last week's final session of the price discussions began — financial pressures for savings on the CAP, pressures from some member states to spend much more on Mediterranean products, and pressures from the Commission and others to introduce further co-responsibility measures, some of which would be objectionable from our point of view. Of course, there were other factors also in the background; for example, the policy of some countries to restrict as far as possible increases in food prices.
My main aim in the negotiations was to get the highest possible price rise for Irish farmers and to get it as rapidly as possible. At the same time I was seeking special EEC aid to deal with the difficult farm income situation here. I achieved both of those objectives. We secured an average increase of over 13 per cent in the Community farm support prices applied in Ireland. This was a greater increase than in any other member state except Italy who had devalued their currency. The overall price increase for the UK is 9½ per cent while that for Germany is between 5 per cent and 6 per cent.
I note that, when giving its opinion on the price proposals, the European Parliament would have been satisfied with an average increase of 12 per cent, weighted towards the products in deficit and against products in surplus such as milk. This would have meant less than 12 per cent for Ireland because of our heavy dependence on milk. However, the result we actually secured is more than the European Parliament recommended. The new prices for milk and beef, by far our most important products, came into effect on 6 April, apart from an element of 2½ per cent in the beef price which comes next December. Last year we had to wait until June for the price adjustments. The benefits of the earlier price settlement this year are very considerable. For example, the value of the increases on April and May milk and beef is about £35 million. Thus we had every incentive to get a quick settlement.
Following the change in green rates after the devaluation of the Italian lira and the adjustment of the value of the ECU, it was possible to obtain a devaluation of the Irish green pound which had the effect of increasing the Community farm prices applied here by 3.92 per cent. This brought our green pound into full alignment with the market value of our currency.
If we had not made this change, we would have again faced an MCA charge on our exports as from last Monday. Also in the agri-monetary sector, the Council agreed to changes in the German green rate which reduced Germany's MCA charge on imports by 6.6 percentage points for milk and 5.6 points for other products. This reduction should be of substantial benefit to Irish Agricultural exports to Germany. In the case of the United Kingdom there was a reduction of 2.1 percentage points in the MCA, and this too will benefit our exporters.
For us the price increase for milk is over 13 per cent. The related increases in the intervention prices for butter and skim milk powder include a similar increase in respect of higher processing costs. This is something I had been pressing for during the negotiations, especially as the allowance has not been changed for some years. Together, these two adjustments should give an increase of at least 7p per gallon, and possibly up to 8p for the Irish milk producer. This is the biggest ever increase in one single step. Furthermore, the super levy, to which I was totally opposed, has again been withdrawn. Last year Ireland alone was opposed to this levy but this year a number of other Ministers supported my line. The removal of this threat gives our industry the possibility of further expansion towards levels of development which obtain elsewhere in the Community.
The general rate of the basic linear levy has of course increased from 2 per cent to 2.5 per cent. While nobody likes having to pay a higher levy, accepting this instead of the super levy is clearly very much in our interest. I had hoped to be able to secure a greater degree of exemption from the levy for disadvantaged areas and, indeed, I pressed that viewpoint strongly at the Council. For the time being at least, the Council felt unable to do more than to maintain the existing differential of 0.5 per cent in favour of disadvantaged areas, but we will continue to pursue this issue in the future.
There is, of course, the commitment to take further action if the cost of disposal of milk rises as a result of an increase of at least 1 per cent in community deliveries this year. For the milk producers, this formula is a substantial improvement on the automatic linking of production increases with new restrictions as was done in the past.
The idea of a heavier levy on very intensive milk producers, especially those using feed from outside the Community, has not been abandoned, although the Council were not yet prepared to adopt it last week. The Commission are to give it further consideration. That approach is one which we favour and it has appeared in a Commission proposal for the first time this year. It would give comparatively favourable treatment to those producers who make use principally of the feed they can produce on their own land. I think that is right, and we will be pressing for it again when the opportunity offers.
Two other points from the Council decisions in the dairy sector should also be mentioned. These arise from the Council's confirmation of the mini-package of measures provisionally agreed by the Council at their February meeting. The first relates to New Zealand butter. Imports are to be limited to 94,000 tonnes in 1981 and 92,000 tonnes in 1982. These amounts are well below the 115,000 tonnes which New Zealand was authorised to deliver in 1980, arising out of the arrangements made following the Declaration agreed at the Summit here in Dublin in 1975. They are also below the 95,000 tonnes level, to which New Zealand agreed to reduce its deliveries last year. It is a matter for satisfaction that the trend in deliveries continues to be downward.
Furthermore, as a direct result of closer co-operation between the Community and New Zealand, the other main world supplier of dairy produce, there has been a very great improvement in world market prices. This co-operation has resulted in substantial savings for the Community Budget and has been an important factor in enabling the Community to achieve a record level of diary produce exports last year.
The other important milk matter from the mini-package, which was confirmed last week, relates to investment aids for milk production. Last year, the Council decided to ban such investment aids except for farmers carrying out development plans, or farm improvement plans under common measures. That ban was not put into effect at the time and the Council have now relaxed it so that member states may give investment aids to milk producers who have not submitted development plans provided that the investment does not bring their herds above 40 dairy cows. That was an advantageous change for this country, especially when seen in conjunction with another step forward we made in the mini-package, namely the inclusion in the development category of farmers with only 85 per cent of the comparable income.
Before moving away from the dairy sector, I should mention that the consumed subsidy on butter in the United Kingdom is being kept unchanged rather than being subject to a reduced Community contribution as the Commission had proposed. This, of course, will benefit our butter exports to the UK and help to maintain consumption in that important market outlet.
Overall, the agreement reached in Brussels should result in an average price for creamery milk producers of over 60p per gallon. This compares with an average level of 30p per gallion in 1975.
In the beef sector, the price increase will be over 14 per cent, of which 2.5 per cent will apply from next December. I was able to maintain the derogation which allows this country to retain the use of intervention as long as our weekly market price for cattle remains below 85 per cent of the Community guide price. Although cattle prices are good at present, and intervention buying less necessary than in the past, it is essential for us that there should be a floor under the market for slaughter cattle. This derogation provides one. The Commission have stated their intention of introducing increased seasonality into intervention buying of beef forequarters and hindquarters. A somewhat similar arrangement, involving the suspension of intervention for forequarters, has operated for the past three or four months without damaging the market in this country. Also a Community grading scale for beef carcases which is to be introduced as soon as the technical details have been fully ironed out, will provide a common language for the beef trade in the Community and facilitate our exports to the other member states.
All in all, the prospects for the cattle sector are very encouraging. Prices this year are at record levels and have been running at about 20 per cent above last year's. They are, in fact, almost three times higher than they were paid to farmers in 1974.
With the increase in the intervention price and higher export refunds, further increases should follow. Calf prices, too, are buoyant and are now averaging almost £85 per head as compared with £57 this time last year and with prices of as low as £10 per head and even much lower during 1974-75.
The Council decided to reduce the calf premium in Italy in 1981-82. Indeed, the Commission and some member states want to abolish it completely. I made a determined effort to have this premium extended to Ireland, holding up the Council's final decisions for a considerable time. When it became clear from the Council's discussions that the choice was between an immediate settlement worth £215 million in a full year to Irish farmers, and a postponement for an indefinite period with possible erosion of that settlement, I chose to make sure, there and then, of the exceptional benefits that were on the table for us. But I did not do so without getting an undertaking that the Commission would make further proposals, in particular in favour of the Irish cattle sector, in time for Council decision by the middle of next July. No undertaking of this kind was given to any other member state.
For some years now, the meat industry in this country has experienced difficulties from time to time in competing with Northern factories for cattle supplies during periods when specially high levels of variable premium applied in Northern Ireland. As part of last week's price-package the Commission indicated that henceforth a separate rate of variable premium will not be set for Northern Ireland. This change will remove the discriminatory treatment about which the meat industry had been complaining for some time.
In the pigmeat sector, the increase in the basic price is 15.4 per cent for Ireland, including the agri-monetary effect. One of the difficulties about the Community pigmeat system has always been that the basic price has less direct impact on the market than the prices fixed in other sectors. This year, however, the Commission have undertaken to manage the pigmeat market in such a manner that the agreed increase in the basic price will have a corresponding effect on the market price. The Commission have also undertaken to tighten up the administration of the Community protection system against pigmeat imports from Third countries. These undertakings are most important and should help the conditions for pigmeat production.
For sheepmeat, there will be an increase of 14.8 per cent in the Irish reference price, including the agri-monetary effect and a 3 per cent alignment step towards a common Community reference price. This price increase brings the Irish reference price to over 106p per lb which compares with an average price of around 86p last year and less than 40p in 1975. This is substantial encouragement to our producers to improve both the quantity and the quality of their product.
The "Clawback" charged on sheepmeat exports from the UK, which is designed to offset the effects of the slaughter premium paid there, will continue to operate in intra-Community trade and will ensure that UK sheepmeat has not an unwarranted advantage, particularly in the important French market.
The intervention price for feed grains and the reference price for soft wheat are increased by about 10 per cent, including the agri-monetary element. Target prices are being raised by about 2 per cent more, thus enlarging the extent of Community preference for grain produced in the Community over imports from Third countries.
As I mentioned earlier, the Commission had proposed a particular form of co-responsibility in the cereals sector. Their idea was, broadly, to reduce intervention prices if production rose. For this purpose, 5 per cent of the intervention price was to be held back until the results of the Community harvest became known.
I and a number of other Ministers saw serious objections to this from the cereal producers' point of view. The final outcome was that the Council did not accept this proposal. They will further review the question in the context of the 1982-83 price fixing.
For sugar there will be a price increase of over 12 per cent, again including the agri-monetary element. This will give a substantial net gain to producers even when the new production levy of 2 per cent is taken into account. This production levy is part of the so-called "mini-package", which was agreed in February subject to an Italian reservation which was withdrawn last week. The 2 per cent figure is a maximum, not a fixed, charge. The levy will not be charged at all unless the cost of disposing of sugar makes it necessary. I should point out that no financing for the disposal of Community sugar was necessary for most of last year.
But the most significant part for us of the sugar arrangements confirmed in the price package is the retention of Ireland's "A" quota at its present level of 182,000 tonnes at a time when the movement in the Community has been towards cutting sugar quotas generally. In practice full use of this facility will mean expanding our beet acreage to produce at least 182,000 tonnes of sugar. I am glad that the efforts of the sugar company to secure an increased beet acreage this year are meeting with a good response, and I would urge more farmers to consider this remunerative line of production so as to ensure that our full quota will be produced. Production of this quantity, together with the price increase now agreed, will not only improve growers' incomes but will also help the Sugar Company in their difficult financial situation.
Finally, the settlement last week enables Ireland to continue to import on favourable terms raw sugar from the ACP countries for refining here, thereby providing valuable employment opportunities.
I come now to what was for us a vital element of the 1981-82 prices decisions, namely, the special measures for Ireland. It is well known that since last year I had been pressing the Commission to bring forward proposals specific to this country's needs. I had pursued the matter intensively both with the last Vice—President Gundelach and, after his untimely death, with the present Commissioner for Agriculture, Mr. Dalsager.
I had stressed the very serious decline in farm incomes here in 1979 and 1980 and had urged that the situation should be met by special measures which would act directly on farm incomes and would also encourage farmers to resume current investments on which they had been forced to cut back.
I had pointed out that the high degree of dependence of the Irish economy on agriculture, taken together with the fact that our national resources were severely limited compared with those of other member states, made it essential that the Community should show solidarity by assisting us.
The Commission had, of course, difficulties of their own to face in complying with my request. As I have said, we are going through a time of financial stringency and cut-backs in expenditure at Community level. This did not make it 1 235any easier for me to have my requests any easier for me to have my requests accepted. Also, the Council had in the recent past adopted other measures specifically for Ireland — the western drainage scheme, the cross-Border drainage scheme and the comprehensive structural measures for the west of Ireland, worth £300 million in a ten year period. Other member states too had experienced some quite sharp declines in farm incomes although their difficulties were less serious than ours.
In December last I submitted to the Commission a list of possible ways in which help could be provided for our agricultural industry and over recent months these were pursued with the Commission by myself and my Department. When agreement on the "mini-package" was reached last February I made it clear that for me proposals on special measures for Ireland would be an essential element of the 1981-82 price agreement.
The Council approved of the proposals last week, the Agricultural Committee of the European Parliament approved of them on Tuesday last and I understand that the European Parliament itself is to discuss them today and vote on them tomorrow. The proposals must then go through a formal adoption procedure by the Council and, following some Commission implementing regulations, they will come into effect. In the Council discussions last week it was agreed to extend the measures to Northern Ireland. I welcomed that course because I know that a difficult farm income position also prevails there.
The special measures include a programme for the development of beef cattle production which contains four separate measures. First, there is to be a lime subsidy of £2.50 per tonne. This is designed to offset the downward trend in lime use which has been taking place recently. It should encourage farmers to restore lime application to normal levels, thus increasing yields and incomes. There is also to be Community aid for intensifying our performance testing and progeny testing programmes. Thirdly, a subsidy of £3 per tonne of silage will be available to farmers making silage for the first time. It is now widely recognised that silage is superior to hay as a winter feed and silage making is a development that must be fostered in our climatic conditions. The new grant should encourage many who are still making hay to change over to silage.
The final point in the cattle development programme is a subsidy of £5 per cow for artificial insemination. Widespread use of this subsidy will operate to raise the efficiency of our cattle herds.
There are two further measures. The first relates to our disease eradication programmes. The elimination of bovine TB and brucellosis is, of course, essential for our livestock and dairying sectors. But the Government — and now the Community too — recognise that in the present farm income situation the financial impact on farmers of some of the eradication procedures has become harder to bear. Aid of up to £4 per animal will now be made available to help farmers to meet the cost of pre-movement tests.
The final provision relates to the suckler cow premium. For a period of two years the Community will provide the funds to enable us to double the premium to over £26 per cow. This is both an income and a development measure. It should provide a significant income benefit to beef producers while at the same time helping them to build up their cow numbers and so reverse the decline in the beef herd that has been taking place over a considerable period of years.
A feature of these special measures is that they apply to the whole country and not just to the disadvantaged areas. Their total cost is estimated at £51 million, of which £31 million will be provided by the Community and £20 million by the Irish Exchequer. They demonstrate in a very striking way that, just as Ireland is committed to the Community, the Community is also committed to us and has a real interest in the welfare of our agricultural economy.
The prices package as a whole provides a benefit of some £215 million to the Irish agricultural sector in a full year and a gain of around £120 million to our balance of payments. There are substantial improvements for all our major farm products. The price increases are the highest in recent years, and the overall financial benefit is the biggest price settlement improvement that our farmers have ever obtained.
The danger of a super-levy on milk has again been staved off. Significant steps have been taken in dismantling MCA protection in some of our export markets. Our special measures have been agreed, and on top of that there is a commitment to further proposals to help us. The Commission has undertaken to study other methods of assisting in social and other problems resulting from the fall in incomes in the agricultural sector which is of particular importance to the Irish economy.
In addition, the Council has requested the Commission to examine the possibilities for further relieving the current serious income difficulties of Irish agriculture and, in particular, for the cattle sector and to bring forward proposals so that the Council could take decisions before 15 July next. These commitments are most valuable and are further evidence of the willingness of the Community to help a member state which has serious temporary difficulties to overcome.
Our agricultural sector has faced great difficulties over the past year or two. The year 1980 was not a particularly good one for our farmers. The weather certainly was no great help. But the major underlying cause was the recession which had bedevilled the economies of the western countries over the last few years.
The Government have been very conscious of the adverse situation in the agricultural industry and of the effect on farmers' incomes. The Taoiseach, the Minister for Finance and I held regular meetings with the leaders of the farming organisations during the year. Arising from these discussions with the farm leaders the Government took positive steps to alleviate those difficulties and promote renewed investment and expansion in the agricultural industry.
The measures taken by the Government represent a formidable list. Last autumn we introduced a new winter fodder scheme with fertiliser and silage subsidies at a cost of over £2 million. An extra £23 million was provided for the farm modernisation scheme. We removed last year's second moiety of rates for farmers in the £40 to £60 RV category at a cost of £6 million. Arrangements were made through the associated banks and the ACC for a constructive and positive approach to the restructuring of existing loans where farmers were faced with serious repayment problems and we also arranged for £100 million to be loaned to farmers at reduced interest rates.
The EEC beef suckler scheme, worth about £6 million, was introduced and we supplemented this with a national scheme of grants for additional cows. The rates of grants under the cattle headage, beef cow and sheep headage schemes were substantially increased, being more or less doubled in most cases. The subsidy under the mountain lamb extension scheme was also doubled and the cost to farmers of warble dressing was kept at the previous year's level. We increased the annual grant to Macra na Feirme. All these measures were introduced by the Government at a cost of £39 million.
But the Government did not stop with these measures. They were only the beginning. In our budget last February a further £35 million for farming was provided. We abolished resource tax and introduced modifications in the income tax provisions applying to farmers. Full relief from rates was granted to farmers under £50 RV and 50 per cent relief for those between £50 and £70 RV at a cost of almost £20 million in 1981. 59,000 farmers will benefit directly from this, with 49,000 getting full relief. The position now is that only 15,000 farmers out of a total of 150,000 are paying full rates. And these 15,000 are the farmers who are benefiting from the abolition of the resource tax. So in effect the budget measures benefited the total farming community. In addition, we suspended the disease eradication levies, giving a direct saving to farmers of almost £10 million in 1981. A sum of £250,000 was provided to assist the development of the seed potato industry. All the measures I have mentioned, which were taken by the Government, were what the responsible farmers' leadership agreed in discussion were necessary and are surely clear and positive indications of the Government's concern for our agricultural industry. These measures cannot be looked at in isolation. They are part of an ongoing programme, and we will be shortly meeting farmers' representatives again to review the situation in the light of the Brussels' decisions.
As I said at the start, improvements in the farm income situation can come from three main sources, the EEC, the Exchequer and the farmers themselves. I have outlined what we have secured from the EEC and what the Government are providing. While I have left until last the contribution that farmers themselves can make, I do not want this to be taken as implying a lower degree of importance to it than to action by the EEC or by the Government. There is wide recognition that we are far from reaching the full potential of Irish soils. That potential can only be attained by farmers themselves — the EEC cannot do it, nor can the Government. It is the 150,000 Irish farm families who determine just what is produced, and not just the quantity but the quality as well.
In recent years there has been a very substantial level of capital investment in agriculture. Since 1975 well over £1,000 million has been invested in land improvement, buildings, machinery and so on. We have not yet seen an adequate return on that investment. The opportunities for improved output and efficiency are there in all sectors of the industry. Our average milk yields are nowhere near what they should be, despite our natural advantages in dairying. The potential improvement in most dairy farmers' incomes from improved yields and higher stocking rates far outweighs anything that is likely to be obtained from higher prices.
The same philosophy holds for other farm enterprises. There are huge areas in this country devoted to cattle production where output is far below what it could be. We should aim at a target of 500 kilos live weight by two years old; many farms are not achieving even 400 kilos today. That extra 100 kilos can be achieved by adequate winter feed, good grassland management in the grazing season, and a high standard of animal husbandry. At today's prices for cattle it would give the farmer a worth-while boost in income to reach these standards. In the case of sheep we need to aim at a standard of 150 per cent lambing for lowland flocks and 100 per cent for hill flocks if full profitability of the enterprise is to be realised.
There is also considerable scope for improvement in our tillage enterprises. According to the Sugar Company an improvement of two tons an acre in beet yield or 2 per cent in sugar content is readily achievable. Similarly there is room for improvement in cereals. At present a significant divergence exists between the yields obtained by the top producers and the least efficient ones, and an average increase of up to 25 per cent is easily attainable.
The extra farm revenue which these improvements would represent would not involve great increases in costs but would require improved husbandry — early ploughing, cultivating at the right time and early sowing. The cumulative effect of the price increases and other measures agreed in Brussels last week, the steps already taken by the Government and the opportunities for increased output and efficiency available to the farmer provide a strong impetus to the further development of the agricultural sector. I am confident that we shall see the restoration of strong growth in the farming sector provided that everyone involved plays his full part.
The Government will not hesitate to take whatever further steps are necessary, but there must be an equal determination throughout the industry to match this with all possible efforts to increase output and efficiency. If this is done, not only will we leave behind the difficulties of the past two years but we shall see the industry entering into a new era of success and prosperity. The achievement of that position will be helped by the EEC and the Government measures which I have outlined. They will do much to reverse the downturn in incomes and put the industry back on the road to expansion and recovery. Despite the decline in dairy cows it looks as if milk production this year will be up to the 1980 level, and possibly slightly above it. The Brussels agreement should mean an increase of at least 7p per gallon and possibly more. Indeed, when account is taken of the high calf prices, the dairy farmer will be benefiting to the tune of several pence more on top of that.
Cattle prices in recent times have been at record levels. The high prices for calves contrast sharply with the situation in 1974-75, when under the previous Government things were nearly at the stage where calves could not be given away for nothing. The present situation is very far from that.
