I move:
That a sum not exceeding £265,235,000 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of December, 1982, for the salaries and expenses of the Office of the Minister for Agriculture, including certain services administered by that Office, and for payment of certain subsidies and sundry grants-in-aid.
The formal motion for the Estimate for Lands and the Supplementary Estimate for Agriculture will be put at the end of the debate but the debate itself will cover all three Estimates. Notes on the main activities of my Department, including the Land Commission, have already been circulated and will, I trust, be of assistance to Deputies. Before dealing with detailed aspects of the Agriculture Estimate I would like to make a few general observations on the current situation in agriculture and the role of agriculture in the economy.
Agricultural output in 1981 was worth over £1,900 million at farm gate value. This represents an increase of more than 15 per cent over 1980. Some improvement in the agricultural cost-price ratio was apparent during 1981; the rate of input price increase was less than 15 per cent while output prices rose by almost 19 per cent. As a result of this development, family farm incomes rose by 17 per cent in nominal terms. Allowing for inflation and for a decline in the number of people employed on the land, the net result was a decline of almost 2 per cent in real income per head. This was not an outstanding result but it compares favourable with the very substantial declines in real farm incomes in 1979 and 1980, and provides the basis for the more significant improvement which seems likely in the current year.
As regards the contribution of agriculture to the Irish economy, I would point out that in 1981 it accounted for approximately 12 per cent of gross national product, while agricultural exports together with receipts from FEOGA amounted to £1,553 million, or almost a third of the country's total exports. The proportion of our people directly engaged in agriculture was nearly 19 per cent of all those gainfully employed. In addition to this contribution from the primary agricultural sector, agriculture-based industry consolidated its role as an important contributor to the national economy employing 15 per cent of all those engaged in manufacturing and accounting for 25 per cent of total manufacturing output. These performance figures relate to a year in which agricultural production was still suffering from the effects of the recession and in which output was still very much below the potential of our soil and our agricultural processing industries.
The years 1979 and 1980 constituted a very difficult period for Irish agriculture. As prices failed to keep pace with inflation, interest rates rose sharply and family farm incomes dropped as a result. As I have said, the farm income outturn in 1981 represented a significant improvement on performance in the immediately preceding years. Current indications are that this improvement can now be built on and sustained. Some independent commentators have suggested that family farm incomes may rise by as much as 25 per cent this year. After allowing for inflation this would mean a return to growth in farm incomes in real terms.
In this context and amid these signs of recovery on the way the Government are setting their priorities for the agricultural sector. The planning group which I recently established will make an important input in this respect. This group is representative of all the main agricultural interests, and it is hoped that its report will be available by about October next. In the meantime the Estimates before the House reflect my concern that the national breeding herd should be expanded so as to lay the foundation for sustained growth over the period of the plan and that agriculture should be a buoyant developing sector of the economy making a major contribution to overall national recovery and expansion.
We are all aware of the influence which the EEC and, in particular, decisions made under the common agricultural policy have on the development of Irish agriculture. The most important of these decisions is the annual farm prices package. I can well understand the concern expressed by farmers at the delay in concluding the price fixing negotiations in most years. The annual price fixing has become increasingly difficult and complex, with issues now being included which have little relevance to farm prices. This year the task was made even more difficult by the action of the UK in linking its agreement on the farm package to a satisfactory agreement on its budgetary rebate issue. In the end, the majority of my colleagues and I considered that this did not justify delaying the agreement on farm prices which had been already supported by nine member states. As a result, the Agricultural Ministers decided the issue by majority vote. I am satisfied that this action was fully justified and in the best interests of Irish agriculture. While the delay in reaching agreement on the prices this year was no worse than in a number of recent years, these delays have a particular impact on Irish farmers because they occur at a time when our milk production is seasonally high. I intend to see what can be done to avoid a repetition in the future of these undesirable delays.
From Ireland's point of view, the farm package negotiated was a most satisfactory one. Its main features included an average increase of 10½ per cent in farm support prices and a calf premium of £22 per head for our producers. In addition, a national calved heifer scheme is being introduced to stimulate growth in our breeding herd. The milk co-responsibility levy has been reduced by ½ per cent and a special scheme of aid is being provided for small milk producers. This measure will involve the payment of £4½ million to our producers, and my Department are in contact with the farmer organisations as to how best this payment might be distributed. The overall benefit of the package to the Irish farm sector is estimated at £235 million over a full 12-month period. This is a huge figure by any standard. It will provide an important boost by way of income support to the farming community and will encourage increased production.
The figure of £235 million represents only part of the Community benefit to our agriculture. It shows the effects of one year's price increase. We should not forget that the farm sector also benefits from the effects of past decisions. Part of these benefits are reflected in direct transfers from the Community. In 1981 my Department paid out as much as £329 million from the guarantee section of FEOGA. Also, there are, of course, the benefits of the higher prices realised from sales of agricultural products within the Community. These sales do not normally involve FEOGA payment but the benefits accruing to our farmers from the higher prices obtained are no less real.
All this goes to demonstrate how vital the CAP is to us, not only for the influence it has on the agricultural sector but also for its impact on the economy as a whole. As we know, there are those who would like to see the CAP overhauled and changed. They want to see expenditure on agriculture curtailed and the Community budget restricted in a way that would be to our disadvantage. The whole issue of Community financing has been brought to a head by the fact that EEC expenditure is approaching its legal limit and there is indeed extremely strong pressure to impose some limitation on the Community resources made available to agriculture. As Minister for Agriculture, I will resist vigorously any attempts to change the fundamental rules under which the CAP operates at present and, so as to ensure that adequate resources will be available for agriculture, I will continue to campaign for the modification of the artificial limit on the Community budget, which is restricting the development of the entire Community.
Turning now to the Estimates themselves, the gross sum for the Agriculture Estimate is almost £356 million or some £65 million more than the amount provided in 1981. The main increases occur under salaries and wages, consumer subsidies on milk and butter, interest subsidy schemes, scheme for expansion of the cattle breeding herd, market intervention, the farm modernisation scheme and the EEC Programme of Special Measures for Ireland. Receipts are estimated to rise by £19 million, the main increases being in contributions from the EEC in respect of the accelerated eradication of bovine diseases, the farm modernisation scheme and the disadvantaged areas schemes.
The gross amount of £356 million which I have mentioned does not, of course, represent the full picture in regard to expenditure on agriculture because it does not include most of the money handled by my Department in respect of EEC agricultural support measures. In 1981 direct payments on these measures funded by the EEC amounted to some £329 million while £92 million raised by borrowings was used to meet the capital cost of intervention purchases of beef, skimmed milk powder and barley.
I should like now to deal with some of the main agricultural products. Although cattle prices recently were at their highest level ever, supplies of slaughter cattle are tight and many of the meat factories are working at reduced capacity, are closed or on short-time working. Factory throughout in 1981 was 883,000 cattle as against 1,368,000 in 1980. Live exports were also down in 1981 — to 431,000 head compared with 474,000 in 1980. Recent changes in the rates of EEC export refunds should prove advantageous to the meat trade. The export refunds on carcase beef have been increased by 18 per cent, while refunds on live cattle were increased by 6 per cent. This has led to a situation where the refund on carcase beef is now approximately £60 higher than that on the live animal, thus enabling the factories to compete effectively for the available supplies of cattle. Also, as a result of pressure by me, a proposal has been put forward by the Commission which will put boneless beef on the same footing as bone-in beef. This will remove a longstanding grievance of the meat industry. However, until cattle numbers are increased, I cannot see a dramatic long-term improvement in the cattle supply position.
An expanded national herd is the essential basis for enabling both the meat trade and the live trade to make their proper contribution to the betterment of the farming community and the national economy. A measure to encourage expansion of the cattle breeding herd has been introduced, and a sum of £5.5 million has been provided under subhead D.6 for this purpose. This measure provides for an interest subsidy of £70 for each additional calved heifer over and above normal herd replacements. Application forms for this subsidy are now available at local offices of my Department and ACOT, and an announcement to this effect is being made in the newspapers. For next year and 1984 the subsidy will be in the form of a straight grant of £70.
In the recent EEC price negotiations I secured agreement to the extension of the calf premium to this country. This is something we have been seeking ever since that premium was introduced in the mid-seventies, and I am glad to have been successful in securing it at last. The premium scheme is now in operation and calves are being tagged throughout the country. Payment under the scheme will not, however, arise until after January next when the first eligible calves will reach the qualifying age of six months. I am confident that the measures now in operation will go a long way towards restoring farmer confidence in expanding their herds and providing the much-needed additional supplies for the export trade.
The beef classification scheme has now been in operation on a statutory basis for just over two years. I regret, however, that as yet it is not adequately reflected in the pricing policies of the factories. It is of great importance for the future of a beef industry that quality production should be appropriately rewarded. This is indispensable if our cattle prices are to be brought more into line with those obtaining elsewhere in the EEC. Work is indeed at an advanced stage in the introduction of a common Community classification system for beef. This will bring a considerable degree of price transparency to the Community market as a whole, but it will also show up more clearly where we fall down on quality and it will emphasise the need to produce what the market requires.
My Department are continuing the various measures for the improvement of the quality of both beef and dairy herds. These include imports of high quality bulls and semen, and an expanded programme of progeny testing. The number of inseminations by the AI service in 1981 was approximately 1.1 million, of which beef breeds accounted for 52 per cent and dairy breeds for 48 per cent. This increased level of usage is at least partly attributable to the subsidy of £4.94 for each first insemination which is available under the EEC Programme of Special Measures for Ireland. This subsidy is continuing and a sum of £5.88 million is provided for it under subhead M.9.
The prosperity of the entire beef industry is affected not only by export market conditions but also by how we market our beef abroad. In this connection the promotional activities of CBF on the main Community markets have been paying dividends. Subhead I.1 shows a significant increase — from £371,000 in 1981 to £765,000 in 1982 — in the provision for CBF. Arrangements are also being made to enable CBF to obtain a bigger income from the levy on slaughterings and live exports. I shall shortly be introducing a motion in the House to provide for this.
Under subhead C.1 over £200,000 has been provided for milk recording, which under arrangements now being introduced will become the responsibility of a new co-operative representative of the major interests involved. It is expected that up to 35,000 cows will be recorded this year under the new system while a further 35,000 will be recorded under the Department's existing scheme. The intention is that the latter should be phased out and replaced by the new system.
Creamery milk production in 1981 was 820 million gallons, a decrease of almost 2 per cent compared with the previous year. The outlook for this year is, however, more promising. On the basis of production returns to date and given reasonably favourable weather during the rest of the main production season, there should be an increase of about 5 per cent. The decline in milk production since 1978 has, of course, led to under-employment of the industry's resources, and this in turn has meant that the profitability of the dairy co-operatives has come under some pressure. We are fortunate in having a highly-developed dairy manufacturing capacity — comparable with any in the world — which has been able to overcome the difficulties resulting from static or declining volumes of raw material.
Our priority now must be to increase milk production. We have some natural advantages which should enable us to attain the levels of development reached by our more advanced partners in the Community. The rewards for doing so would be very great indeed. If we were to raise average milk yields in Ireland to the level of the Community average, we would add over £300 million a year to output from the dairy sector. As virtually all of this would be exported, it would involve a considerable and welcome improvement in our balance of payments situation.
This year saw the 21st anniversary of the establishment of An Bord Bainne. During its 21 years in existence the board's annual exports have risen from £7 million to £450 million, and it has demonstrated commendable enterprise and versatility in the way in which it has successfully marketed an expanding range of Irish dairy products in practically every corner of the globe. I am sure that we can look forward to an equally successful performance by the board in the years ahead.
In the case of sheepmeat the Community system which was introduced in late 1980 is functioning satisfactorily so far as we are concerned. The market support arrangements have increased confidence among producers and there has been an increase in the national breeding flock over the last 12 months.
On the commencement of the new regime member states had the option of market support through a variable premium or a ewe premium. The UK chose the variable premium, while all other member states, including ourselves, opted for the ewe premium. The use of different systems gave rise to smuggling from Northern Ireland to here. With a view to curbing this smuggling, Northern Ireland has now been made a separate region for sheepmeat, and will in future operate a ewe premium system as we do. This should alleviate the smuggling problem and restore normal trading patterns.
Sheep production is now one of the most remunerative enterprises for Irish farmers, and the low initial capital outlay makes it particularly attractive. Good market prices are available for the right product, and producers and processors alike should not miss the opportunity of supplying what Continental markets require. This means giving special attention to producing leaner lambs within a certain weight range. CBF can, of course, play a valuable part in expanding the markets we have and in developing new ones.
The value of pig output expanded appreciably in 1981. While there is a reasonably good market at present, there is some uncertainty about the position later in the year. The EEC Commission has, however, undertaken to introduce market support measures if necessary.
I am sorry to say that there is again a great deal of uncertainty concerning the future of centralised export marketing which has always been regarded as essential for the pigmeat industry. The present problems arise from a Supreme Court ruling in May 1981 which effectively deprived the Pigs and Bacon Commission — the PBC — of its statutory source of income. Contributions on a voluntary basis were not forthcoming, and indeed support for the PBC wanted rapidly. First of all my predecessor, and later I myself, had lengthy discussions with all interested parties with a view to continuing centralised exporting in some form. Following on these discussions the Government decided in March last to assume responsibility for a deficit of £5.6 million which the PBC had accumulated mainly because the non-payment of levies by bacon factories, as well as for the cost of some staff redundancies and pension rights of other retired staff. The £5.6 million is being provided for in a Supplementary Estimate moved today.
For their part the industry have taken over the running and all other costs of the PBC since early April. Discussions are continuing between the various interests concerned on the establishment of a new organisational structure which will replace the present PBC and enable the industry to continue centralised exporting arrangements under the control of, and fully financed by, the industry itself. The sooner a new agreed structure emerges, the better for the industry. The Government have made a very significant contribution to the solution of the problems which exist. It is reasonable to expect that other interests involved, that is the curers and the producers, will make their contribution now.
So far as poultry and eggs are concerned production in 1981 showed a slight increase on 1980. This is encouraging, particularly in the egg sector where confidence seems to be slowly returning. Another encouraging feature is that the response to the scheme of aid measures for commercial egg packers has been much higher than was expected. This scheme enables applicants to seek FEOGA assistance as well.
Both the poultry and egg sectors continue to experience strong competition from Northern Ireland. I am concerned at our apparent inability to compete effectively with Northern produce, although I appreciate that this may not be entirely due to factors within our control. Our first priority in any case must be to recover lost market shares in the domestic area. This is the only certain way forward although we must also be on the lookout for new markets. However, we will not be able to accomplish these aims without improved presentation and more vigorous marketing.
Many of the problems arising must be seen in an EEC context. More orderly marketing would be of immense value and I will, therefore, continue to press in Brussels for the early establishment of an intra-professional body for the egg sector.
I might add that our ability to export and develop in the poultry industry is shown by the duck sector where almost 90 per cent of the output is exported and further expansion is contemplated. This is most heartening. The future also looks bright for the turkey sector with further concentration on added-value products.
About two-thirds of the total acreage under cereals is now accounted for by feeding barley. Over the past couple of years there has been a large swing from spring to winter wheat with the result that winter wheat now represents about 75 per cent of the wheat crop. In this connection, I would like to see the flour millers and the grain growers getting together to ensure that as much Irish breadmaking wheat as possible will be used by the flour milling industry in the future.
Surveys carried out by my Department have shown that, mainly because of a shortage of grain drying equipment, delays can occur at some intake points at harvest time. With a view to improving this situation a sum of £100,000 is provided under subhead M.5 towards the cost of grain drying and storage projects. This funding will enable approved applicants to apply for a FEOGA grant.
In the current marketing year the Department took some 8,000 tonnes of barley into intervention. Intervention in cereals on this scale is a new development here and it remains to be seen whether the trend will continue in the future. All of the barley has since been sold.
The commercial horticultural sector makes a valuable contribution to overall agricultural output. Many will be surprised to learn that the output of this sector had a farm gate value of £57 million in 1981. In general, the quality of our fruit and vegetables has improved appreciably. Energy costs have been a serious problem here and a sum of £200,000 has been allocated in the Budget to relieve the commercial horticultural sector, including mushroom growers. The Finance Bill makes provision for this relief in the form of a remission of excise duty on fuel oil.
Aid for the development of horticultural production units continues to be covered by the farm modernisation scheme. Specific items of aid to horticulture amounting to £30,000 are, however, provided for under subhead D.4 and M.7 — the former for the promotion of marketing, and the later for aid towards the formation and operation costs of producer organisations.
The acreage of main crop potatoes declined by approximately 15 per cent in 1981 — 34,000 hectares compared with 40,400. As a result there was a shortfall in home-produced supplies, which was made up by imports from other member states, mainly the Netherlands and the UK. The acreage this year is estimated to be up on 1981 by approximately 15 per cent and, given reasonable yields, there should be much less need for imported supplies.
As a consumer I must say that the quality of Irish potatoes seems to have deteriorated over the years. It may be that quality is being sacrificed to yield but, whatever the reason, it is becoming increasingly difficult to get really good potatoes. This is one area of production where producers can do much for themselves by improving the quality and presentation of their product. As the current year has shown, competition from imports is now very real. The one sure way of beating that competition is to have a better home-grown product and market it efficiently.
Sugar production in the past season was about 167,000 tonnes which, although up on the previous season, was nevertheless disappointing in that it failed again to fill our A quota of 182,000 tonnes. I am hopeful that this year's production will show an increase although I understand that the full area offered for contract by the Sugar Company has not been taken up. Deputies will be now have seen the Sugar Manufacture (Amendment) Bill, 1982 which provides for an increase in the authorised capital of the company. The Second Stage of the Bill will be moved next week and it will then be possible to debate the sugar industry in more detail.
A major provision in the Estimate is that under Subhead E.1 for the consumer subsidies on milk and butter. These subsidies amount to about 4p per pint on milk in the Dublin area and 4½ per pint elsewhere and 35p per lb. on butter. They have a significant impact on household expenditure on food, particularly by large families, and at the same time they assist the market for dairy produce.
A matter of concern to me is the smuggling of subsidised butter to Northern Ireland, which is costing the Exchequer a substantial sum. The difference in the retail price of about 30p per lb. between here and the North provides a strong incentive to move butter over the Border. I am taking steps towards reducing the subsidy leakage by means of an order limiting to 10 lb. or 4.5 kilogrammes the amount of butter which may be exported in a traveller's personal baggage.
As Deputies are aware, the farm modernisation scheme is now the framework for State aid for on-farm investment. Apart from field drainage in western countries, to which I shall refer later, the scheme covers virtually every type of capital investment by the farmer — land improvement, farm buildings, farm roadways, farm water supplies, and so on. For 1982 a sum of £33 million is provided for the scheme under Subhead M.1. The number of farmers now participating in the scheme is about 102,000, which is indicative of a high level of farmer confidence in the scheme and the willingness of farmers, despite the difficult financial climate, to continue to invest in the development of their farms. Over the eight years of its operation total investment under the scheme has been of the order of £590 million and grant aid from the Exchequer and the EEC has totalled almost £200 million. Despite this high level of investment I would like to see more farmers undertaking systematic development programmes and availing more fully of the advisory services. I particularly have in mind farmers in the small and medium-sized range.
During 1981 the Council of Ministers made certain amendments to the Directive under which the scheme operates. Of particular significance was a decision to allow greater flexibility for the participation of farmers in the development category.
In the past year considerable progress has been made under the western drainage scheme. This scheme came into operation in 1979 and was extended in July 1981. The response to it has exceeded all expectations, over 40,000 applications having been received. So far almost 21,000 approvals have been issued, covering 114,000 hectares at an estimated cost of £60 million. A sum of £7 million is included under subhead M.1 to cover expenditure on this scheme in the current year.
The programme for western development, for which £7 million is provided under subhead M.1, provides for special measures designed to stimulate the development of agriculture in the West of Ireland. The aid measures under the programme include a wide range of development measures, including infrastructural improvements such as roads, water supplies and electricity, land improvement and farm improvement as well as forestry development and aids for agriculture based industries. So far as my Department are concerned 5,400 applications for land improvement schemes have been received.
In August 1981 under the previous Government certain modifications in the levels of grant aid available under the farm modernisation scheme, the western drainage scheme and the programme for western development were introduced. In the recent budget the grant rates were restored to their former levels and a provision of £4 million will be included in a Supplementary Estimate for this purpose.
Under subhead M.2, which covers headage payments in the disadvantaged areas, the original provision of £36.9 milion will be increased by £0.4 million, in a Supplementary Estimate. This extra provision follows from the budget and is in accordance with the Government's pre-election commitment to break the linkage between cattle and sheep schemes introduced by the previous Government. For 1982 an applicant can be paid on up to 30 livestock units for cattle and also on up to 200 ewes for sheep. This should be of particular benefit to those progressive farmers in the west who make the most of their scarce resources by engaging in mixed grazing systems.
For the 1982 headage schemes, the off-farm income limit has been raised from £4,750 to £5,415. Also, and this was decided on by the previous Government, the spouse's income will be taken into account in calculating the applicant's income outside the farm. The decision to include the spouse's income enables the available financial resources to be calculated on those more dependent on farming. I should point out that an income restriction is laid down by the Commission under the EEC suckler cow scheme, the stipulation being that to qualify farmers must earn at least 50 per cent of their income from farming.
There are, however, no income restrictions for the £70 national calved heifer subsidy or the £22 calf premium. A farmer in the disadvantaged areas can now receive under the various cattle headage schemes grants of up to £148 for an additional calved heifer plus calf while a farmer outside those areas can get £116. A sum of almost £24½ million is being provided under subheads C.2, C.3 and C.5 for the disease eradication programmes.
Progress under the brucellosis eradication scheme continues to be highly satisfactory and the overall herd incidence is now down to 1 per cent. There appears to be every prospect that the disease may be eradicated completely within the next five years.
On the bovine tuberculosis side, however, the position continues to be less satisfactory. The 1981-82 round of testing disclosed a disease incidence rate of 2.76 per cent of herds tested, as compared with 2.12 per cent in the previous year. It would be wrong to judge progress under the scheme on the basis of these figures alone, but clearly the situation must be viewed with some concern. At present, all aspects of the bovine TB scheme, including grants and hardship arrangements, are being reviewed and certain changes in procedures and in general emphasis can be expected to result from this exercise.
Included in the Appropriations-in-Aid are receipts from the EEC arising out of our programme for accelerated eradication of bovine TB and brucellosis. The three-year acceleration plans have now expired. The basic EEC Directive dealing with the eradication of these diseases has, however, been extended for two further years and we will, therefore, be able to continue the acceleration process within the terms of the Directive for a further period. In this connection we have to submit a new accelerated eradication programme to the EEC Commission within the next month or six weeks, and it is against this background that the comprehensive review to which I referred is being carried out.
Another disease to which I would like to refer is rabies. With its spread westward across the Continent of Europe, the risk that the disease may reach this country through a smuggled dog or cat or other animal increased. All air and shipping companies, harbour authorities, travel agencies, home and continental yachting clubs etc., have been alerted to the danger of an illegal importation. Continuing publicity in the press, on radio and on television will emphasise the risk to human and animal health that could arise from any evasion of my Department's import requirements.
An Chomhairle Oiliúna Talmhaiochta (ACOT) is the national body set up to provide agricultural advisory, education and training services. A sum of £14.526 million for the general purposes of ACOT is provided under subhead B.15 together with £1.6 million for capital purposes under subhead B.16. In addition ACOT will be receiving about £4.15 million from the local rates.
ACOT is responsible for the implementation of that part of the Programme for Western Development relating to the provision of new agricultural advisory and training facilities. This involves mainly the construction of 22 new agricultural training centres, the provision of additional student places at existing residential colleges, and the establishment of an Advisory Resource Centre at Athenry as a training centre for agricultural advisors. A FEOGA refund of 50 per cent will be made in respect of eligible costs incurred under the programme. The grant-in-aid for capital purposes include a provision towards the implementation of these projects.
Some of their former functions continue to be performed by the county committees of agriculture, which now include representatives of the voluntary agricultural organisations active in each county. These include the operation of a number of livestock premium and other agricultural schemes at county level. In addition, the committees prepare annual advisory and training programmes for the county and monitor the implementation of these programmes by ACOT. Provision is made under subhead B.6 for £300,000 in grants to the committees to supplement their income from rates contributions.
Under subhead B.3 a sum of £13.105 million is being provided for An Foras Talúntais this year. An Foras also obtain financial contributions from various sectors of the agricultural industry, and these constitute a most practical and tangible recognition of the valuable work performed by An Foras for Irish agriculture.
A provision of over £7.4 million is made under subhead B.1 for grants to the University Colleges for the purpose of maintaining the faculties of General Agriculture and Veterinary Medicine at UCD and the faculty of Dairy Science at UCC. These grants include capital provisions in respect of the final accounts for the new Agriculture building at UCD and the new Science building at UCC. Both buildings are now in use.
The grant-in-aid to Bord na gCapall under subhead J. is £950,000 as compared with £1,028,000 in 1981. The reduction resulted from a review of the activities of Bord na gCapall carried out by officials of my Department last year. They suggested that the board should explore possible alternative sources of income and that some of the schemes and other expenditure had limited effects and should be curtailed. The board have in fact identified areas for action more or less in line with the suggestions.
Since last autumn a series of measures has been introduced to assist farmers in difficulties in meeting interest payments on their borrowings. Firstly, an interest subsidy scheme partially financed by the EEC was introduced on 1 September last providing a subsidy of 5 per cent per annum for two years on borrowings for on-farm investment by development farmers under the farm modernisation scheme. Almost 8,000 farmers have applied to participate in the scheme and £4 million is provided under subhead M.1 for it.
A somewhat similar 5 per cent interest subsidy scheme, which is nationally financed, was introduced in 1 December to benefit non-development farmers. Over 4,500 farmers have applied under this scheme, and a sum of £5 million is provided for it under subhead F.3.
It was recognised that a hard core of potentially viable farmers are experiencing serious financial difficulties and that they would require assistance over and above that provided in these 5 per cent subsidy schemes if they were to regain viability. A reduced interest subsidy scheme for farmers in severe financial difficulty was accordingly introduced on 1 April. The scheme provides an interest subsidy of up to 8¾ per cent for three years on loans arranged before the end of 1980 to finance farm-related investment. The scheme is being operated in conjunction with the associated banks and the Agricultural Credit Corporation, who are bearing part of the cost. Some of the Exchequer cost will be met by means of taxation relief, but some will be in the form of direct cash payments to the financial institutions concerned. A sum of £1.5 million is provided for this purpose in a Supplementary Estimate.
Other schemes involving State guarantees on loans for agricultural purposes which are administered by the banks and the ACC are being continued. A sum of £1 million is provided under subhead F.2 to meet the exchange risk of the lending institutions in respect of low interest loans financed from foreign currencies. Under subhead F.1 provision of over £453,000 is made to assist certain advances made by the ACC to agriculture-based industries. On top of this £186,000 is provided in a Supplementary Estimate in respect of a subvention to the ACC to enable mitigation of the cost of implementing the return to work settlement at the Clover Meats Waterford plant earlier this year.
Expenses and losses in connection with market intervention are expected to amount to some £34.6 million and this is provided under subheads M.3 and M.4. These expenses cover such matters as storage, de-boning and transport, as well as interest on the capital borrowings used for the purpose of the intervention products. Intervention activities are carried out on behalf of the EEC and the expenses incurred are recouped from FEOGA by way of allowances based on average costs throughout the Community. These recoupments are estimated at over £22 million as shown under subhead N.15.
The net difference of 12½ million mainly reflects the relatively high interest charges here, compared with the average level allowed by FEOGA. My Department have to provide capital totalling about £100 million for intervention purchases and, while the capital losses on disposal are met by FEOGA, the interest allowed to us falls appreciably short of the actual cost of borrowing. The average rate allowed by FEOGA is only 9 per cent whereas my Department are paying 19.25 per cent for money at present. This difference represents about £10 million and accounts for the bulk of the net expenditure on intervention. Of course, the intervention system is a key element in the EEC price support arrangements and the net cost of it to us has to be looked at against the background of the very considerable benefits accruing to us from the whole operation of the system.
A provision of £19 million is made under subhead M.9 in respect of expenditure under the EEC Programme of Special Measures for Ireland. These measures which include subsidies on silage, A.I. and ground limestone, qualify for a 50 per cent recoupment from FEOGA. Under subhead D.5 provision is being made for winter fodder schemes which are financed in full by the Exchequer. Both of these series of measures were designed to help farmers to meet the effects of the recession and to stimulate the expansion of agricultural production.
To meet our contributions to FAO and certain other international organisations as well as to finance certain aid measures for developing countries, some £2.3 million is being provided under subhead K. This is an increase of almost £650,000 on the 1981 figure. Contributions are also being maintained to a number of Irish agricultural organisations such as the ICOS, ICA, Macra na Feirme, Muintir na Tire, etc. These appear under the B group of subheads.
The balance of the expenditure provided for in the Estimate relates mainly to administrative costs and a number of smaller ongoing schemes and services. The Department of Agriculture are one of the larger Departments of State, with some 60 per cent of the total staff serving outside the Dublin area. While the staff pay and travelling on the Agriculture Vote amounts to about £42 million a further £3½ million will come from Vote 51. This has to be seen in the context of the wide range of services that have to be administered, including a very high level of on-farm and local inspections. In fact, the cost of salaries, wages and travelling of my Department last year represented about 6 per cent of the national and EEC funds handled.
I mentioned earlier that receipts are up by £19 million. This arises mainly from increased EEC recoupments relating to the accelerated eradication of bovine diseases — subheads N.8 and N.9 — the farm modernisation scheme — subhead N.13 — the disadvantaged areas schemes — subhead N.14 — and the Programme of Special Measures for Ireland — subhead N.18. The fees payable to my Department for services have been examined in detail and have been updated in a number of cases. The resulting additional receipts are reflected under subheads N.19, N.20 and N.21.
I should now like to deal with the Estimate for Lands. The gross Estimate is just over £17.3 million, an increase of some £2.5 million on last year's provision. The additional amount required covers such items as increases in wages and salaries under subhead A, in travelling expenses under subhead B and in Post Office charges under subhead C, as well as increased statutory contributions towards the revision of annuities under subhead E.
However, the greatest single increase, almost £1 million arises from the deficiency in income from untenanted land under subhead G. This subhead is a contingency provision to meet the situation where the income from the letting of lands held by the Land Commission while awaiting division and allocation is insufficient to meet outgoings. The outgoings include servicing of the bonds issued for the purchase of lands, rates, wages of herds and caretakers, and such items as temporary fencing to facilitate lettings. Receipts from lettings are also supplied towards meeting part of any losses incurred on the resale of lands at below cost. Up to 1979 receipts from lettings of lands on hands were not more than sufficient to meet all outgoings but since then there has been a deficit each year, which has had to be made good from subhead G.
The fall in the level of receipts is attributable to the difficult conditions in agriculture generally which have affected the level of rents obtainable, to the fact that estates exceeding 40 hectares are now let by private treaty to facilitate smallholders who could not be assured of securing a letting if the public auction procedure were adopted, and to the fact that the burden of financing resale losses over many years has now to be borne by a reduced area of lands on hands. The rents now being obtained average £86 per hectare for grazing and £136 for tillage. These rates are well below what could be obtained two or three years ago. At present, the Land Commission have on hands some 19,400 hectares suitable for letting. For some time past, special emphasis has been placed on disposing rapidly of the lands on hands. As a result, the area at present held by the Land Commission is below what was normal a few years ago.
As Deputies are aware, the land settlement programme is financed primarily by means of land bonds. The Land Commission are required by law to pay market value for land acquired compulsorily. At the same time, the interest rate on the land bonds must be such as will ensure that they will remain at or near par for a reasonable time. In turn, the amount of the annuity which an allottee should pay is determined by the cost price of the land and the interest rate on the bonds issued to pay for it. Take, for example, an acre costing £1,200. That land will be paid for at present in 18¼ per cent land bonds and an annual sum of £222 will be required to pay the interest to the bondholder and provide a sinking fund for the eventual redemption of the bonds. To meet this, the allottee should pay an annuity of £222 for the acre of land. Anything less than that figure would constitute a loss that would have to be covered by taxation. In practice, in order to dispose of lands on hands, the Land Commission are now obliged to offer much of it to allottees at annuities very much below the cost level. In this connection, it is important to note that when lands are sold below cost by the Land Commission, the loss is not a once-off one. The deficit must be made good by the Exchequer during the full period the annuity has to run. At present, this is 24 years. Clearly there is a limit to the extent to which the taxpayer can be expected to subsidise land purchase operations by the Land Commission when heavy losses are being incurred on the resale of the land.
Before concluding, I would like to say a few words in regard to future land policy which I consider has a major role to play in the further development of agriculture. It is essential to devise a system whereby as much as possible of the country's agricultural land can be channelled to progressive small to medium farmers who are making the best possible use of their existing holdings and to young persons with acceptable agricultural experience and education. There is a limit to what the State can do through the acquisition and division programme of the Land Commission and, as I have explained, such Land Commission operations can involve costs for the taxpayers. Any new measures should, I suggest, concentrate on providing the right environment within which deserving smallholders and committed young landless persons are not disadvantaged in the land market in procuring the land they need. Much work on a new land policy has been done by the last Fianna Fáil administration and a White Paper on the subject was issued in December 1980. My Minister of State, Deputy Lorcan Allen, and I have been carrying out a thorough examination of the whole question of land policy, and proposals are at present being prepared for consideration by the Government.
A Supplementary Estimate for Agriculture has now been introduced and at the end of this debate I shall be moving the formal motion for it. In the course of my speech I have already referred to all the expenditure items provided for in the Supplementary Estimate. That Estimate also takes account of savings totalling some £840,000 on subheads E.2 and D.5. The former provided for a grant of £200,000 to the existing statutory Pigs and Bacon Commission. As it is envisaged that that body will now be ceasing operations, the particular expenditure provided for will not arise. Of course, a separate winding-up provision of £5.6 million is being made for the commission under subhead E.3. The saving of £640,000 under subhead D.5 relates to the winter fodder schemes which operated last year. Final payments under these schemes are now being made and the total amount of the claims received by my Department fall £640,000 short of the provision.
The Estimates which we are discussing relate to the country's biggest industry, and I use the word "industry" advisedly as being appropriate in this context. They cover a large and varied range of schemes and services, the impact of which is of vital importance not only to the farming community but also to the national economy. Agriculture has encountered considerable difficulties over the past few years but the prospects are now beginning to look brighter than they have been for some time. The Government's aim is to provide the conditions and incentives that will enable and encourage farmers to improve their productivity and increase production and that will help to bring about a thriving and prosperous agricultural industry. The funds now being sought will contribute to the achievement of this aim, and I confidently recommended the Estimates to the House.
