Dáil Éireann debate -
Wednesday, 26 Jan 1983

Vol. 339 No. 4

Private Members' Business. - Agricultural Aid: Motion.

Mr. Lenihan

I move:

That Dáil Éireann calls on the Government to maintain farmers' incomes, to promote higher agricultural production and in particular to implement the £100 million exchange guaranteed cheap interest loans scheme for farmers to aid the restocking of the national herd as recommended in the Four Year Plan for Agriculture and as provided for in the Estimates published in November.

This motion is concerned with two important related aspects, agricultural production and farm income. It cannot be stressed sufficiently that the two points are inextricably related in that farmers' incomes can increase only as a result of increased productivity from the land. In the motion we call on the Government to maintain farmers' incomes and to promote higher agricultural production. In this we are talking about two inter-related objectives.

During my period as Minister for Agriculture I was very conscious of that fact. I had discussions with farming organisations and I found that the main thrust of the discussions at local, regional and national level tended to concentrate on doing something of a practical nature to increase the herd numbers, particularly cattle herd numbers. This is an area in which we have not achieved any success in the past decade despite our membership of the EEC. In that time they have devised a range of incentives and aids for the Irish agricultural economy that one would have thought would have resulted in a substantial rise in cattle herd numbers. That has not happened.

We have here an intractable difficult problem and it behoves whoever occupies the Minister's chair and the excellent officials in the Department of Agriculture to work as a team to solve the problem. This motivated me to push strongly last year for the introduction for the first time of the calf premium scheme in the price package negotiations. The full benefits of that scheme are accruing now and with the scheme continuing until next year as part of the package proposals I hope it will act as an incentive. In my view the basic problem that needs redress is to raise cattle herd numbers and to provide the necessary aids and incentives to attain this objective.

Last May we got agreement in Brussels on a package where almost £40 million was made available and which I hope will be made available in the coming year. That was an important help from the EEC but I saw that side-by-side with that there had to be a breakthrough in the area of lending. Where a farmer was willing to make a commitment towards increasing cattle production he should be helped by way of reasonable credit arrangements to enable him to purchase stock or to replace it. There should be a plan worked out over a four- or five-year period which was agreed with the advisory services, and on that basis a farmer should be able to raise the necessry finances. Account should be taken of the land available and of the capacity, initiative and enterprise of the farmer. The necessary credit arrangements should be made to carry that farmer through this difficult period.

The problem with the farmer raising beef is that he has a longer cycle period to work out his profit situation. I accept that aids are available in the form of grants from the EEC and at national level but a vacuum exists that requires to be filled to cushion the farmer who wishes to specialise in raising stock numbers, in replacing bad stock with good stock and in increasing his cattle numbers. I have outlined the thinking behind this motion. I do not think the Minister or his officials — whom I respect, as I do the Minister — would disagree with that philosophy. It is a philosophy and thinking in accordance with the views of the farming organisations.

In order that we would have the greatest degree of concentration in raising agricultural output as well as the co-operation of the farming organisations, I established for the first time a committee that sought to concern itself with the preparation of a four-year plan for agriculture. This was a commitment we made in the general election before last and was one I implemented earlier last year when I became Minister for Agriculture. That committee met on a number of occasions and should shortly issue a report. It was chaired by a senior official in the Department of Agriculture and had representatives of the farming organisations and the State and semi-State agencies concerned with agricultural development. As part of their remit — and the Minister is aware of this — they gave me in advance of the publication of their final recommendations some interim recommendations that would form part of the final recommendations that could be implemented in a budgetary context in the coming financial year.

I was anxious to do this in the interests of Irish farmers but as I saw it, delay might be involved in the committee deliberating about details and items over a period of time, running across the budgetary decision framework. The Minister for Agriculture is as aware as I am of what I am talking about. A committee could and should come in with a final recommendation by the end of this month or early next month — I would like elucidation on that from the Minister — but that would have been too late to implement some basic and immediate decisions which, I have come to a very firm conclusion after the sort of consultations and discussions I am talking about, could be implemented straight away without financial imvolvement to any great extent and without any great financial commitment.

One of these matters, the important one, I refer to here in the motion. It was a cheap interest loan scheme based on a Euro currency facility. I will not spell out how that could be done, but basically what was involved was risk guarantee in regard to exchange changes. Such a mechanism has been adopted previously in regard to industry and to agriculture. Deputy Dukes, who was my shadow Minister for Agriculture, on both radio and television and also in the House thought that this was a sensible sort of facility that could be availed of and that there was no real difficulty in pursuing this. For the record, what would be involved in this is making it available to the farmers I have talked about who would be engaged in a stocking, restocking or replacement scheme on a planned basis so that such farmers would have funds available to them at this low interest Euro currency rate that would run at somewhere in the region of a 10 per cent or 11 per cent repayment as far as the farmer is concerned. That was the type of loan scheme envisaged which would be substantial points below the current interest rate and would have a reasonable credit or loan repayment overhead which a farmer going into the type of enterprise I am talking about could carry.

That proposal emerged after considerable discussion and negotiation with the farming organisations throughout the country. That idea carried no financial involvement beyond a risk involvement to some extent, but even the most conservative estimates of risk prepared by my Department at the time did not envisage that any more than the £100 million which I have mentioned could be made available, £6 million potential risk as far as the current budget was concerned. There is no need to write that into the Book of Estimates, in case the Minister for Agriculture wants to make any point in that regard. We were only talking about a potential contingency risk, and I emphasise that. I would have the greatest expectation that at the end of the year one would be in a line ball situation where no real loss would be involved. If there was a contingency or expectation of loss, that was a matter for which provision could be made in the budget if necessary by a line entry in the budget providing for such a loss. A routine matter in budgetary preparations and in the preparation of Books of Estimates over a long number of years is that one puts in some money to cover a contingency. That is all we are talking about. We are not talking about an allocation of money as such. What is imperative to remember is that we are talking about making available to the Irish farmer embarking on this type of productive enterprise a loan facility at attractive interest rates that would induce and encourage him to increase his herd stock. That is what this scheme was all about. It was a central scheme in my thinking and also, as it happened an important aspect of the recommendations made to me by this committee on an interim basis which of course will be incorporated in the total overall plan which will be produced by them, I hope, in the immediate future.

An Ceann Comhairle

The Deputy has less than four minutes.

Mr. Lenihan

I appreciate that. I have spent some time on this scheme and I have written it into the notice of motion because, as I say advisedly to the Minister and to the Government generally I do not understand what they are about in this. This is a matter which was agreed on completely between Deputy Dukes, as he then was, and myself on radio and television. I do not have the tapes here. I do not go in for having tapes around, but on tape——

Mr. Deasy

Does the Deputy swear?

Mr. Lenihan

It is there out in RTE and if the Minister for Agriculture or Deputy Hegarty wishes to go there they can confirm that. During the election campaign we had a number of policy proposals in regard to agriculture — I will not go into them in detail — concerned with increasing production and so on in regard to this scheme. Deputy Dukes said to me, and it is on record in RTE, that there is no need for any fuss about this. He said that he felt that I was making an enormous case out of nothing, that as far as he was concerned the provision of this £100 million on the loan basis I am talking about, based on getting money from European funds on a European currency facility that is there precisely for industrial and agricultural problems or difficulties of this kind, would present no difficulty in ensuring that this type of scheme could be adopted. Deputy Dukes said across to me on this RTE programme — I have not brought the tapes in but my recollection is reasonable enough and if he was here he would have to agree — across the table, "Brian"— we were Brian and Alan —"there is absolutely no need for you to make any play about that facility. It has been there before, it can be created or recreated again. It is a facility that use can be made of and there is absolutely no problem." To quote his words to me, there was absolutely no problem about adopting this scheme. Whereas we had disagreement in other agricultural areas, as far as this scheme is concerned we saw absolutely no problems. It was merely a matter of putting a line into the Book of Estimates making a provision for a contingency. We proposed to do that in our budget and the Book of Estimates laid it totally open for us to do that. That was our proposal.

I have not so far gone into any political pyrotechnics nor do I propose to do so. I am talking about a single scheme which could be highly beneficial to the Irish agricultural community. It is aimed directly at a key area of production which is to raise the cattle herd numbers and it is geared to the productive farmer who wants to make use of it, a man who will borrow some money as long as he is not crucified by excessive interest rates and can so it under this facility available in Europe, provided the Government take a very small risk in an Irish farmer who is going to do something productive on the land. The risk in regard to that is minimal and the cost is minimal so far as any potential risk is involved. Very briefly that is the whole purpose of our putting down this motion. I would like to hear the Minister elaborate particularly on the central theme that I have sought to adumbrate.

Minister for Agriculture (Mr. Deasy)

I move amendment No. 1:

To delete all words after "Dáil Éireann" and substitute the following:

supports the Government's policy for agriculture, which is designed in particular to achieve the expansion of agricultural production and exports with resulting benefits for farmers' incomes and the national economy.

This motion must be one of the greatest faux pas we have had in this House for a long time.

Mr. Lenihan

What did the Minister say?

Mr. Deasy

I said it must be one of the greatest faux pas we have had in this House for a considerable time——

An Ceann Comhairle

The Minister for Agriculture without interruption.

Mr. Deasy

——because the last line states "as provided for in the Estimates published in November". I have the Book of Estimates here published in November 1982 and there is no reference whatsoever to the substance of the motion. In actual fact I think the Ceann Comhairle made a mistake because he should have declared the motion null and void. We are discussing it and I will get on with the debate.

I would like to deal at the outset with the broad policy of the Government towards agriculture and the conditions and environment in which that policy has to operate. In our present economic circumstances, it is of more importance than ever before that policies for the individual sectors of the economy should be closely aligned with, and be complementary to, the national objectives, which have been clearly set out in the Government's programme. The main thrust of these objectives relates to the need to foster economic recovery and growth. In particular, in order that the Government can make a significant contribution to the country's economic recovery, measures must be taken to improve our competitiveness. These must involve the control of inflation and the phasing out of the current budget deficit. Accordingly, agricultural policy must evolve in the context of the objectives which have been laid down and within the very real constraints set by those objectives.

In 1982 net output increased by 6 per cent and farm incomes rose by over 20 per cent. It is the Government's aim to ensure that the momentum of the favourable trends in 1982 be maintained over the next few years. Policy will reflect the basic principle that growth in agricultural incomes and growth in the national economy should be achieved in the most rational way possible, that is, through expansion of output and improvement in productivity. This approach in turn implies that Exchequer resources must be devoted to those items of expenditure which can contribute most to the achievement of higher farm output and better incomes.

In this context, the control of inflation must be seen as the most critical element of Government policy affecting the economy in general and agriculture in particular. In recent years agricultural incomes have been squeezed as a result of rapidly rising input costs while output prices, being determined largely by the prices decisions of the EEC, have reflected the much lower inflation rates of the other member states. Thus, a significant reduction in the rate of inflation here, combined with policies which enable us to derive the maximum benefit from the common agricultural policy will go a long way towards restoring profitability and incomes in farming. They will provide the kind of economic environment in which output growth can be generated and substained.

However, the control of inflation cannot be separated from the objective of the elimination of the current budget deficit. State spending on agriculture, in common with that of other sectors, must be examined and appraised afresh, with a view to ensuring that all of it makes a real and worthwhile contribution in terms of the rate of return accruing to the economy. In present circumstances there can be little justification for the continuance of existing measures, or the introduction of new ones, which do not specifically contribute to the achievement of higher output.

It is against this background that the expenditure programme of the Department of Agriculture is being considered at present. That examination has suggested that several areas deserve closer scrutiny. One of these is expenditure on disease eradication. While efforts to eliminate brucellosis are being quite successful and are showing positive progress, the same cannot be said of the TB campaign, which in fact accounts for the bulk of the money spent. Ways must be found to ensure that expenditure in this area brings rapid and tangible results in the shape of a reduced incidence, and finally eradication, of this damaging disease. We are looking at the various items on which expenditure occurs to see whether the money is going on the right ones and whether it could be spent more effectively, and with greater benefit to those farmers whose herds are affected by the disease.

Moving away from these more general considerations, I would like to turn now to the specific question of low interest loans achieved through the granting of exchange guarantees by the Exchequer. This cannot be considered in isolation from the overall position in regard to national indebtedness and the cost of debt service which, as everyone is now aware, is a huge constraint on the actions of the Government in the public expenditure area. External debt service costs represent a huge drain on Exchequer revenue and is, of course, a type of expenditure over which little or no discretion can be exercised. While interest must be met on these debts, there is also the payment of exchange losses when, as has indeed happened on several occasions, currencies such as the Deutschmark and the Guilder are revalued.

So far as agriculture is concerned, the State has commitments in respect of over £150 million of foreign borrowings by the ACC and a further £50 million authorised for lending to farmers by the associated banks. In view of the potential cost of exchange losses in all the areas covered by State borrowings and exchange guarantees, it is obvious that the utmost caution must be exercised in undertaking further potential liabilities. The scale of the commitments already entered into just cannot be ignored in any consideration of new proposals involving further exchange guarantees.

As regards the scheme referred to in the motion, I think it would be useful to say a few words about experience of a similar scheme, which has operated for some years now. I am referring to the Eurocurrency Exchange Guarantee Scheme which has been operated since 1980 by my Department in conjunction with the associated banks and the ACC. Under this scheme the banks and ACC were each authorised to draw down a total of £50 million in EMS currencies for on-lending to farmers at rates which reflected prevailing European interest rates and also included an element to cover both the margins of the lending institutions and a contribution to the exchange risk. Loans up to a maximum of £25,000 are available for a variety of purposes, principally for additional livestock, for working capital, for the erection of essential buildings and for land improvement.

It has been suggested that this type of scheme is virtually costless and can, therefore, be introduced without reference to efficiency and cost-effectiveness criteria. A recent review by my Department has, however, indicated that the ultimate cost of the present scheme over a five-year period could be in the region of £20 million to £25 million.

Mr. Lenihan

That is what I said, £6 million a year.

Mr. Deasy

It might be argued that expenditure incurred to date under this scheme does not show such a high cost. However, the nature of this type of scheme is such that much of the liability arises close to the termination date; hence a lot of the exchange loss will not actually arise until 1985, when the exchange guarantee terminates. While on the subject of cost I would like to set the record straight and make it quite clear that, contrary to what is stated in the motion put down by Deputy Lenihan, no provision for a new scheme was included in the 1983 Estimates.

Mr. Lenihan

It did not have to be.

Mr. Deasy

It has to be. It is misleading to say in the motion that provision was made in the Estimates published in November. Absolutely no provision was made. As the Deputy has stated provision in the region of £6 million would have been about right.

(Interruptions.)

An Ceann Comhairle

The Minister without interruption. It is a very limited debate.

Mr. Lenihan

I am trying to help the Minister.

Mr. Deasy

I cannot help the Deputy for his sins of omission. I am trying to explain the position.

An Ceann Comhairle

The Minister should not provoke the Deputy into interrupting him and waste his time.

Mr. Deasy

You know I would not dream of doing that. The figure the Deputy has mentioned, £6 million, is approximately the estimate I have received from the Department but there was no provision for that in the Estimate.

Mr. Lenihan

It was contingent.

Mr. Deasy

Deputy Lenihan states that Deputy Dukes while Opposition spokesman on agriculture gave a commitment on the same lines but Deputy Dukes did not have to draw up the Book of Estimates and did not have to give that definite commitment. He did not make the comment when advocating such a scheme that if it were to be brought in corresponding reductions in foreign borrowings would have to be made — quite a reasonable alternative but it is not as Deputy Lenihan has stated, merely a potential contingency risk, and that at the end of the year everything would be in a line-ball situation. The actual nuts and bolts of the situation are that it would cost the Exchequer approximately £6 million for which there was no provision in the Estimate.

Mr. Lenihan

I fear that the Minister is not standing up to the Department of Finance.

Mr. Deasy

Far from being costless, schemes of the type suggested are potentially very expensive. This is demonstrated by the fact that the financial institutions are unwilling to enter into such a scheme for farmers without an assurance that any exchange loss will be met by the Exchequer.

As regards the interest benefit received by farmers, the review of the existing scheme has shown that this benefit is highly variable. Since the start of the existing scheme the benefit has varied from virtually nil in some periods to almost 7 per cent in others. A farmer who borrowed for a five-year period at the start of the scheme would to date have had an average advantage of less than 3 per cent compared with domestic interest rates. Another point is that the cost of the scheme at any time does not necessarily bear any relationship to the benefit to farmers. For example, there have been periods during which the interest benefit was low because European interest rates were then relatively high, but exchange losses continued to be realised and could not be avoided.

With regard to the purposes for which the existing scheme funds have been used, approximately 50 per cent has been used for working capital and one-third for the purchase of livestock. But the funds used for livestock purchase have not necessarily facilitated growth in the breeding herd. Much of them seem to have been used largely as working capital by farmers involved in the various stages of beef production. While some of the funds have been used to support production which might otherwise have been lost, on the whole, the scheme does not appear to have had the full impact on production which it could have if the funds were applied to the most productive areas of investment.

At no point during the operation of the scheme has the total of £100 million availise able been fully utilised. At the end of December some £17 million of the £100 million was the amount available for lending and further funds become available according as repayments of earlier loans are made. Thus, there is still significant scope for continued activity under the existing arrangements.

In the light of the foregoing analysis of the existing scheme, caution in the consideration of any new and similar scheme is justified. I have in fact initiated discussions between my Department and the lending institutions with a view to finding ways in which the existing mechanisms can be used more effectively to help to promote increased agricultural output, principally through expansion in the breeding herd. These discussions are currently going on.

I should like to re-emphasise that at no stage were moneys provided in the Estimate for such a loan scheme. It is highly inaccurate for Deputy Lenihan to try to give any other impression. I am confident that the motion was tabled without this knowledge being available but I will leave it at that and trust that the Deputy will see the wisdom of the amendment.

Mr. Hilliard

Coming from a rural area I can assure the Minister that farmers throughout the country will be shocked to learn that the money in question will not be available to them. One is sometimes mystified to hear the Government announce that so much of what they are implementing was already decided on by the previous administration but in the case in question there was no decision on the part of Fianna Fáil about not implementing what was being requested by the farming organisations. Instead, we were proceeding with their submissions. There was a definite understanding on the part of the various farming organisations that the negotiations would be proceeded with.

The Minister is giving a very simple answer when raising the question of whether the £6 million was included in the Estimate. The greatest need in agriculture today is for investment. The farmers are waiting for the Government to indicate what money will be available to the farming community in the years ahead. Livestock is the lifeline of agriculture. This £100 million that we hear of would have been used as a cash flow. It would have strengthened the market and would have helped to keep up prices thereby giving encouragement to farmers and in particular to the dairy sector to produce more livestock. Every day we hear our trade union friends shout about more employment but they, too, must recognise that it is in the agricultural sector that the greatest contribution to employment can be made. Despite this, we have the new Minister for Agriculture telling not only the farmers but those working in other sectors that he is not interested. If we do not produce more livestock we will not produce more jobs. Many farmers are unable to pay the high mortgage repayments they have incurred. These people were looking forward to the £100 million being provided at a low interest rate but the Minister has indicated clearly that he is not interested in their problem.

A £6 million investment into this area would have encouraged and enabled the farmers to increase production. Many farmers will now have to scrap the many plans they had drawn up after consulting with professional people on production costs and so on because these farmers will not be prepared to incur further debt while those farmers who are not already in debt will not borrow money at rates of 20 or 25 per cent. The message from the Minister appears to be that the farmers should forget about increasing production. It is clear that what the farmers want is a fixed low interest rate in order that they be in a position to plan their business just as anybody else can do. I wish to record my great disappointment with the Minister's announcement and to warn him that the farmers will not forget the day the Coalition made such an announcement.

Minister of State at the Department of Agriculture (Mr. Hegarty)

We never made any commitment about this £100 million loan. We are speaking for ourselves and this commitment was not made. It is important to have that recorded. I do not have to emphasise to the House the importance of farming to this country; we know that it is the cornerstone of our economy. Agriculture is for us what oil or mineral wealth is for other nations. If we can develop our agriculture to its maximum it will be of enormous benefit to the entire economy.

It is fair to say that Irish farming is at a watershed in its development. We have had the initial impact of EEC membership which brought higher prices, more secure markets and significant improvements in output and efficiency. Irish agriculture has shown itself to be well capable of taking enormous strides in development in the past and it can do so in the future. During the greater part of the seventies the achievements of the farming sector were of major importance to the economy with beneficial effects on employment, incomes and exports. During the period 1970-78, the value of gross agricultural output rose from £344 million to £1,593 million or by over 34 per cent in volume terms; cattle numbers increased from 5,956,000 head to 7,125,000 head; average yields per cow rose by over 140 gallons per cow and cereal yields grew by 30 per cent. Processing plants were modernised and expanded and educational facilities available to farmers have been vastly improved. It was really a boom time in agriculture. Through the farm modernisation scheme and other developmental schemes, farmers have been encouraged and assisted to improve their land, farm buildings and equipment in order to increase efficiency. The harsh reality is that this bonanza is over, and we are confronted with a new situation compounded by the current widespread economic difficulties throughout the Western World. These difficulties are further compounded by our inability to bring our economy and inflation into line. The big problem about farmers and borrowing — and I know many farmers — is that most of them have over-borrowed and many are in difficulties as a result.

We are all aware of the fact that over the past year or two the industry has been experiencing difficulties. These difficulties have had an impact on other sectors of the economy because agriculture supports such a large proportion of our population and because so many businesses and services are dependent on it. However, we must look to the future and do everything possible to overcome the problems of the agricultural industry. Our task is to provide the encouragement and incentives to ensure that the industry gets back quickly on the path of progress and development.

Any gains we make from now on in the agricultural sector will be harder to achieve. I have been heartened in recent times by the growing realisation among farmers and those working in the industry in co-ops and so on that we will have to fight our way out of the current difficulties. It is heartening that they are prepared to make sacrifices for the ultimate survival of all. Despondency helps nobody, and I think we should have confidence in the ability and strength of our own industry. Getting this positive message across is often difficult as bad news generally seems to get better exposure.

Agriculture in this country is fundamentally sound. The gains we have made from EEC membership have helped us enormously and the agricultural industry has built up a position of considerable strength. But we still have much untapped potential for future growth and development. Of course, there are problems that we now face in both the short term and the long term. The very substantial investment that has been made in capital and land improvement will continue to provide the infrastructures necessary to support increases in output over many years to come.

In the long term our priorities must be to increase output. That does not simply mean producing more cattle, milk, cereals etc. and leaving it at that. We will secure that full value of increased output only if we attend to the other aspects as well. That means producing more efficiently at farm level, having better processing and handling capacity, but above all marketing, an aspect that has certainly been neglected in some areas. We must market the product more effectively at its highest value. Everybody admits that we have scope for the development of added-value products.

The manner in which land and people — our most important national assets — combine together determines the general pattern of farming. An obvious feature of our agriculture to anyone travelling through the country, is the great variation in type and quality of land used here. At one extreme, we have many top-class farmers who use their land very efficiently to get the best possible return from it. At the other end, there are many who make very poor use of the land they have. In between, we have the majority — those farmers who do a fair job but who still have considerable potential for further development and increased output. We have the potential to get more out of the land and not just in what are regarded as poorer areas but in all areas of the country. We must work to achieve that potential by improving the efficiency of farming wherever possible.

Otherwise, we cannot achieve the growth in output that our country so badly needs. Any country with a precious and limited resource, whether it be oil, mineral wealth or land has a moral obligation, in the interest of its people, to ensure that the resources are used to the best advantage. Every effort made to develop our farms and expand production will generate extra employment for our growing population — not only on the land itself but in the processing, marketing and servicing areas. In this way the benefits from development spread right through the community.

One effect of the current difficulties in agriculture has been to highlight the fundamental importance of this industry in our economy and the vital role it plays in terms of employment, export earning and the balance of payments situation. I believe that other sectors and groups in the economy appreciate the extent of the recession in agriculture and the need to get farm production expanding again. This emphasises the interdependence between the urban and rural communities and shows also how quickly people can recognise the importance and extent of this interdependence in a time of difficulty. It should bring home to us even more clearly that there is no real basis for a rift between urban and rural people, which is so often said to exist.

A feature of and indeed a contributory factor to the problems in farming has been the decline in output which has meant a loss in throughput for the processing sector. Jobs have been lost as a result and the decline is all the more unwelcome in that in recent years there has been considerable investment in plant and equipment with a consequential increase in capacity. This is especially true as regards the beef and dairy sectors. People in my own constituency will be particularly aware of the consequences of the loss of throughput for the beef industry.

Never before have farmers had such a variety of back-up services available to them to improve farm efficiency. We have the opportunity to expand our agriculture and use our farming resources to an extent which was largely denied to us before accession to the EEC. Any farmer who wishes to embark on development can be assured of first-class support in terms of grants and advice. I want to see farmers making full use of the services that are available to them. We have many farmers that have made outstanding and commendable progress in recent years. We need to have more of these. I am particularly anxious to get through to the not so progressive farmer, the individual who for one reason or another has not seen fit to undertake any kind of expansion. The establishment of ACOT has added a new dimension to training and advisory facilities. These problems are now being tackled in a co-ordinated fashion and I am confident that we will see worthwhile results.

I can promise that the Government will give the maximum support possible at all times to the agricultural sector. The response at farm production level and in the various other sectors of the industry, for the sector and the national economy as a whole is of vital importance. For their part, the Government will do all they can to create the right environment for progress and expansion.

I am convinced that the greatest single need in the borrowing and lending scene is to try to put right the situation where so many farmers have overstretched themselves in borrowing. Here I must say that the rescue package which is progressing very favourably in conjunction with the ACC and the banks is beginning to bear fruit. It is easy now with hindsight to say that perhaps farmers were a bit foolhardy to borrow such large sums of money, but we must remember that they were borrowing at very low interest rates and they certainly did not anticipate the kind of inflation which occurred. In Deputy Lenihan's Estimates there were severe cutbacks and we must look to the end result.

Mr. Lenihan

There were no cutbacks in that area.

Mr. Hegarty

Of course there were. We will go through the Book of Estimates, if the Deputy wishes.

Mr. Lenihan

The Minister should not be ridiculous.

Mr. Hegarty

I am not ridiculous.

Minister of State at the Department of Agriculture (Mr. Connaughton)

What about the livestock breeding scheme?

Mr. Hegarty

There were cutbacks. If we are to bring the country back to solvency we will have to cut expenditure and if we are to bring interest rates to a realistic level we must be careful in our housekeeping. It will be our rather difficult job to ensure that any hardship will rest lightly and that money will be provided in the areas where it is most needed. I would hope that in 12 months there would be a fairly substantial improvement in inflation and bank interest rates. Most of the farmers in the EEC are more than happy with the price increases negotiated each year but because of our inflation and high bank interest rates farmers here are less than happy with the prices they receive. It behoves us on all sides of the House to try to put our finances in order before it is too late.

This Government have the difficult task of stopping the rolling stone of inflation and difficult measures must be taken. We will be looking at all aspects of farmer borrowing and we will expedite the schemes already in existence. We will examine these schemes, together with the scheme for additional heifers, in an effort to make them more workable. We will also try to streamline the financial packages from the lending agencies.

Mr. Lenihan

That is what my motion is about.

Mr. Hegarty

No, the Deputy spoke about new borrowings whereas I am talking about existing borrowings. Additional borrowings will not solve any problems at this stage. The farmers who are in trouble are those who have already borrowed heavily. These are the farmers who are most progressive and who are producing most, very often on limited acreage and with very limited assets. We must try to help them. It is unfair of the former Minister to say he had made provision for this. It is not the case.

Mr. S. Byrne

I support this motion. I wish every success to Deputy Deasy in his position as Minister for Agriculture and also extend good wishes to the two Ministers of State. They are charged with a very important responsibility, whether the life of this Government is long or short. Agriculture is our most important industry, regardless of the foreign industries which have been brought in. When this country was at a crossroads during the war years, when the nation needed to be fed and people had to be made secure in their homes, farmers, under a Fianna Fáil Government and a Fianna Fáil Minister for Agriculture, rose to the occasion and were not found wanting in producing the necessary food for our people and the livestock to create wealth for the nation.

I am very disappointed that the new Minister for Agriculture is shilly-shallying about the very important groundwork laid down by the previous Minister when he called in the farming organisations and the banking groups for discussions over a period of nine months in order to find the best possible means of helping the farming industry. That policy is to be thrown into reverse but I appeal to the Minister to reconsider. Thousands of farmers cannot qualify under the existing schemes, not through their own fault but because of technicalities and for various other reasons. The proposed scheme would help such people and it is a shame that we should hesitate about it.

We are all aware of the necessity to create jobs and this is an area in which there is potential for thousands of jobs. Many of our meat factories are working well below capacity because of a shortage of livestock. We must ensure that more livestock will come on stream. Many jobs could be created in creameries and processing factories. In my own constituency the firm of Robert Wilson laid off over 100 people in Cahir due to the shortage of livestock. I appeal to the Minister to reconsider his decision to pour cold water on the hard work done during nine months. What will be the opinion of those who participated in the discussions held by the former Minister?

The only way to create lasting jobs is through agriculture, our main industry. It can give employment and create genuine exports. It has been proved that money invested in agriculture is money well spent and thousands of new jobs have been created in rural areas. I am confident that the farming organisations will alert the Minister to the dangers of his decision. I am sure the Minister and the Ministers of State watched closely while Deputy Lenihan was developing his four-year plan for agriculture. It is sad that this is now to be thrown aside. What is £25 million in the context of our chief industry? We are pouring millions into industries that may not last very long and £25 million would be used up by only a small number of industries. The people who suggest that the £25 million to support this scheme is money badly spent do not have the interests of this country at heart and are not interested in creating jobs or helping the farming community. I appeal to the Minister to reconsider this matter before budget day. This scheme was well thought out and researched by the officials of the Department, the Minister, the banks, the IFA, the ICMSA and the ACC. I do not know why it is being suggested that this scheme should be put on one side.

About an hour ago Deputies were speaking about reforms in this House but simply because we have a change of Government is not a good enough reason to throw out a good scheme. Another hard look should be taken at this scheme because it will give hope to our young farmers who were caught in the trap of buying land at very high prices. These men developed their holdings and will now have to sell portions of their holdings to survive, thus making their holdings less economic. I appeal to the Minister to look at this scheme again because if he throws it out he will regret it in years to come. The Minister comes from rural Ireland, as do his Ministers of State, and I hope they will put pressure on the Minister for Finance between now and budget day to think again for the sake of the country, the farmers and the young people looking for jobs. It has been proved over the last 60 years that if our farmers are down, the country is down.

Minister of State at the Department of Agriculture (Mr. Connaughton)

I am delighted to have this opportunity to say a few words on this very important subject. I cannot but take notice of the air of sensationalism on the Opposition benches. I agree with most of what they said until they discussed the problem at hand. Listening to Deputy Byrne one gets the impression that the only problem facing our farmers is whether we have enough cheap money for productive purposes. From my knowledge of farming — I am a farmer — some of the enormous problems facing our farmers go back over the past four or five years. What is important at this stage is that we do all in our power to help the people who over-borrowed. A man with a wife and family may have over-borrowed through no fault of his own. He carried out the plans laid out for him at a time of low inflation and when it was expected that the green pound would be devalued each time we went to Brussels. The best of farmers got caught in that situation.

The last Coalition Government spent a lot of time trying to get a rescue package off the ground and so get these people out of that terrible fix.

Mr. Lenihan

It took me to put it into effect.

Mr. Connaughton

Yes, but the groundwork was done by the Coalition.

Mr. Lenihan

It was in a cul-de-sac until I got it off the ground.

Mr. Connaughton

Our expertise and imagination brought it to where it is today. I hope in 1983 it will bear the fruit of our endeavours.

Mr. Lenihan

As long as the Minister watches those fellows in the Department of Finance.

Mr. Connaughton

We will not be led by the nose by any Department. We know agriculture and when we get the chance we will show the farmers who their friends are, and they will be found on this side of the House.

(Interruptions.)

I noticed Deputy Byrne called on the IFA to create a rumpus, but I want everybody involved in agriculture to take note of the position we are in, to ensure we can boost production and at the same time help the people who are over-borrowed.

Mr. S. Byrne

Has the Minister told the farmers he is going to drop this scheme?

Mr. Connaughton

We never promised this and I will put that on record, although I have been in the Department but a short time. I noticed from the Deputies' contributions that a lot of time was spent negotiating with the banks, in Europe and so on, but I wonder how much time and expertise went into the £100 million loan we never got. If Fianna Fáil believed this scheme was so important to Irish agriculture, I cannot understand why this money was not included in the Estimate.

Mr. S. Byrne

You were elected to govern.

Mr. Connaughton

We will do that and be delighted to give a lead.

Mr. Lenihan

I hope we see it in the budget.

Mr. Connaughton

The chief agricultural objective of this Government is to secure real income increases for the many thousands of farm families dependent on the land for a living. In addition it is our ambition to achieve a period of sustained growth in the volume of farm output. The land of this country represents our most important national resource. We have an obligation to use it productively and fully. In our present economic situation we cannot afford to have an agricultural sector working at less than full capacity. It is essential, therefore, that agriculture be at the forefront of any economic recovery.

Farming in this country has been locked in a price-cost squeeze since the beginning of the recession. I believe that the key to success in the future lies in enabling the industry to break free from this constraint. Only then will it be in a position to increase the volume of output, to improve performance and to realise its full potential. I think we can achieve this objective by a combination of three policies; securing the best possible benefits and increases at EEC level; through reducing inflation, and by taking action to identify and implement the most efficient use of the resources, land labour and capital. We must be price competitive and this principle applies to agriculture as much as it does to any other sector.

At EEC level I am under no illusions as to the magnitude of the task in hand. The price proposals recently published by the EEC Commission are unsatisfactory though there are some aspects which I welcome, such as the continuation of the very important calf subsidy scheme. I would emphasise that these are only proposals. The final outcome will be determined by what happens at the negotiations which will take place at the Council of Ministers in the coming weeks. In whatever discussions take place we will attempt to secure the best possible price increase for our farmers — and I give the House that guarantee tonight. We will also seek other measures which we consider necessary to assist our agriculture and we will oppose those measures which are not in the best interests of the industry. The low rate of price increase proposed reflects a very different situation at EEC level. We all know that the CAP has been under considerable attack and we have to accept that some change in that policy is inevitable from time to time. However, what we will not accept is any tinkering with the basic principles of the CAP. I want to give an assurance that the Government will be staunch and determined in their defence of these principles.

The future success of policies to reinvigorate agriculture is dependent, not just on our success at EEC level but also on efforts to reduce domestic inflation. The common agricultural policy cannot provide the full solution to our problems while domestic inflation continues at rates significantly higher than those being experienced by our colleagues in the Community. Indeed, as everybody well knows, one of the big problems that we have always had is that, no matter what price increase we get in Europe, because our inflation rate is so high, by the time that price increase is related to Irish agriculture we do not have even a net increase. Thus policies being produced now to increase inflation, including the elimination of the current budget deficit and the achievement of moderation in wages and incomes, will have, we hope, an immediate effect on profitability in agriculture. The key to success lies in all those component parts being put together.

Finally, success at EEC level in securing maximum benefit for our farmers and the further impetus to be derived from a reduction in domestic inflation must be consolidated by efforts to improve efficiency and productivity on every individual farm. Each farmer must re-examine his farm programme to identify the most efficient use of the resources at his disposal. In this context there is great scope for immediate action not requiring large new investments.

On many farms it still appears that the basic element of grassland management, and particularly the provision of winter feed of a sufficiently high quality, is an important factor in our low output.

In addition, we will be looking to the western region for increased output over the next couple of years. With the many incentives that are now available through the western drainage system, the western package, lime and AI subsidies, the various disadvantaged areas aids and so on, the scope for increased output which exists in that region should be readily forthcoming. £300 million is available over a ten-year period under the western development programme for various infrastructural improvements, commonage division, provision of agricultural training centres, on-farm improvements and forestry development. In order to make full use of this money, every farmer should evolve a planned improvement programme in conjunction with his ACOT adviser.

Acting Chairman (Mr. Coughlan)

I have to inform the Minister that he has five minutes left.

Mr. Connaughton

1982 has already brought a very welcome reversal to the downward trend, particularly in the dairy sector. It will be remembered by many farmers as being the first year in which they could see a light at the end of the tunnel — in particular those who had not borrowed. This is an important point, because the subject that we are discussing is, in my opinion, how best to help those who over-borrowed. In my short time in the Department of Agriculture, I have been convinced that agriculture has a primary role in the economic recovery of the country. It has always occupied a prominent position in our economy and will continue to do so.

Fundamentally the industry is sound and, indeed, considerable progress has been made in many facets since our entry to EEC. However, that is not to say that there are not defects and problems to be tackled. It is a fundamental part of our task to ensure that these problems are identified and tackled efficiently and quickly. We will also ensure that the maximum possible proportion of available development resources is channelled into agriculture. I think that by now everybody is convinced that there are limits on the availability of public resources.

Agriculture cannot be granted immunity from the process of review and examination that is now going on with respect to all areas of spending, and inevitably demands for resources will exceed the supply of funds. However, the end result may be beneficial in that the industry will become more cost-effective, more competitive internationally and better equipped to respond to new opportunities arising in the future.

Mr. H. Byrne

Firstly, like my colleague, Deputy Seán Byrne, I should like to congratulate Deputy Deasy on his elevation to the Ministry for Agriculture, and also Deputies Hegarty and Connaughton. The latter two, and I have reason for saying this, have been deeply involved in agriculture and actively engaged in farm organisations, with great success. However, with regard to Deputy Deasy, I have reservations. He is hardworking and will probably lend himself pretty well to the job, but in order to be a good Minister for Agriculture one needs at some stage or other to be involved in agriculture from the practical point of view. However, I wish all three Ministers the very best. Being involved in farming, they must not let the Labour Party impose their philosophy on them, which is, has been and probably always will be anti-farmer. This was clearly evident from the actions of previous Coalition Governments.

Our economy, in my opinion — and, thankfully, still in the opinion of most — is dependent on the state of agriculture at any time. It is no surprise that now when the economy is in an extremely bad state, agriculture is at its lowest.

The motion before us, apart from this £100 million which has been dealt with fairly adequately by the former Minister and by my other colleagues, also asks the Government to maintain farmers' incomes and promote higher agricultural production. Now that the Minister is in Europe negotiating a price increase, he should look for a reasonable price increase which will encourage production, one such as suggested in our motion. We were told to expect a price increase of about 4 per cent. I would like to know of any other sector of the community which would be satisfied with such a price increase. Any groups I have heard tell of are looking for increases of 15 per cent and upwards, certainly in double figures. One can be sure that, whatever the sector, they will certainly get above 10 per cent. Yet, our farmers are expected to be satisfied with a 4 per cent increase, and we are told that it may not even be as high as that. We have for far too long suffered from small price increases and will not continue to accept that position. The Minister has the responsibility of doing all in his power to ensure that farmers do not receive 3 or 4 per cent price increase, but far higher.

The timing of the price increase is of vital importance. Last year, I admit, it was delayed for far too long. Let us not have the same experience this year. Many millions of pounds were lost to many sections of the farming community, particularly the milk sector. I hope that that will not happen this year, and that the Minister will learn from last year's experience.

My time is short but I ask the Minister, when he is negotiating the price increase, not to be intimidated by threats from any source, particularly from the British Minister for Agriculture. We are told that the British housewife will not buy Irish agricultural goods if we adopt the attitude which is being promoted. I ask the Minister to continue promoting that attitude.

During the last period of Coalition Government one of the first things done was to reduce the grant levels to farmers. A grant is not a handout to farmers. It often means the difference between development taking place and no development. Therefore the Minister should not bow to party or sectional interests to get away from the grant system. Farmers have always spent their money well and therefore anything given to them by way of encouragement should be continued.

As I said at the beginning, our economy is dependent on the state of agriculture. If agriculture is in a reasonable state so is the economy. I will give an instance of that from County Wexford. The firm Albatross has taken a fair rapping and 300 workers are affected. Graves, which were engaged in the provision of farm buildings, are on the point of closing because agriculture was not doing well and farmers have not been buying sheds and other farm buildings. The Minister should get his colleagues to accept all these things because if he does not agriculture will be in difficulties and so will the entire economy.

Mr. Lenihan

We have had a constructive debate, but frankly I am disappointed at the lack of response from the Government benches. We have heard expressions and sentiments of goodwill for agriculture but there was no reference to the basic practical aspects of the proposals I introduced for Government approval and which I announced last November. I refer to the scheme for making use of our Euro currency facilities to enable Irish farmers to replace their long-term cattle stocks over a four-year period. The proposal was to make available to them money at 10 per cent or 11 per cent, making use of a 5 per cent differential between our bank rates and Euro finance. At that time Deputy Dukes, the shadow Minister for Agriculture, did not see any value in that scheme and he adopted an attitude to faze me during the election campaign by saying this was easy, that Fianna Fáil were making a great balloon out of something which in his view did not represent any problem.

Deputy Dukes was right, but he is now Minister for Finance and therefore running the Department of Agriculture and telling that Department that in the interests of narrow financial considerations this is not possible. All that is involved is a contingency risk in regard to exchange rates. It is a matter that can be adopted in the budget where you could have some sort of nominal figure to cover a contingency exchange rate. There would not be any difficulty in adopting it.

When I was Minister for Agriculture I got my Government colleagues to agree to it and there would not be any difficulty for the Minister, Deputy Deasy, now, provided he does not allow Deputy Dukes as Minister for Finance to dictate otherwise. It only needs a reasonable degree of commonsense. I have with me the relevant documents of my proposals in the interests of Irish agriculture. I will refer to the Department of Agriculture memo to the Government. My officials and I on 10 November last submitted to the Government a memorandum whose reference is A.P. 1/82 setting out a four-year plan. They were interim recommendations. In that memorandum I referred to a document of 26 October 1982 on the subject of interim recommendations of a working group on a four-year plan for agriculture. We got approval from the Government but I will not go into details of what the Government agreed to. Paragraph 2 on page 1 of the document stated that the total sum the Minister had in mind was £100 million over a four-year period and the document stated that the provision of Eurocurrency funds would involve an exchange risk for the Exchequer of the order of 13 per cent of the capital amount, based on past experience of EMS currencies.

There was nothing unique or strange about it. It was agreed to by the Government. On 17 November, the week after, I made a press announcement in regard to the interim recommendations of the working party who, I hope, are now proceeding to the final conclusions.

An Ceann Comhairle

The Deputy's time is up.

Mr. Lenihan

I intend to specify here, in the first paragraph — I have two minutes, I am used to this——

An Ceann Comhairle

When the Chair says it is a certain time it is a certain time.

Mr. Lenihan

I shall say finally that, in this statement I announced on 17 November last, pending the completion of the examination of the Interim Recommendations of the Working Group on the Four-Year Plan for Agriculture and the receipt of the final report of the group, the Government had accepted in principle many of the group's recommendations. In that statement I said also that in the meantime the Government proposed to proceed with the provision of Euro currency funds at approximately 5 per cent below existing commercial rates for the purchase and retention of additional stock and associated working capital.

An Ceann Comhairle

I am sorry, Deputy——

Mr. Lenihan

I was very glad to receive the co-operation of the officials of the Department of Agriculture in the preparation of the memorandum——

An Ceann Comhairle

Please, Deputy.

Mr. Lenihan

I was glad also to receive the co-operation of Government Departments in the implementation of that——

An Ceann Comhairle

Please, Deputy, when the Chair stands the Deputy should remain seated.

Mr. Lenihan

I was glad to receive the co-operation of the Department of Agriculture in the preparation of that final Press Release——

An Ceann Comhairle

Please, Deputy——

Mr. Lenihan

And I want to say that if Deputy Deasy allows himself to be overwhelmed by the officials of the Department of Finance and, if he is honest, the Department of Agriculture, that would be bad news for Ireland and Irish agriculture.

An Ceann Comhairle

I am very surprised at the Deputy.

Amendment put.

The Dáil divided: Tá, 78; Níl, 65.

Tá

• Allen, Bernard.
• Barnes, Monica.
• Barrett, Seán.
• Barry, Myra.
• Barry, Peter.
• Begley, Michael.
• Bell, Michael.
• Bermingham, Joe.
• Birmingham, George Martin.
• Boland, John.
• Bruton, John.
• Bruton, Richard.
• Burke, Liam.
• Carey, Donal.
• Cluskey, Frank.
• Collins, Edward.
• Conlon, John F.
• Connaughton, Paul.
• Coogan, Fintan.
• Cooney, Patrick Mark.
• Cosgrave, Liam T.
• Cosgrave, Michael Joe.
• Kavanagh, Liam.
• Keating, Michael.
• Kenny, Enda.
• L'Estrange, Gerry.
• McCartin, Joe.
• McGahon, Brendan.
• McGinley, Dinny.
• McLoughlin, Frank.
• Manning, Maurice.
• Mitchell, Gay.
• Mitchell, Jim.
• Molony, David.
• Moynihan, Michael.
• Naughten, Liam.
• Nealon, Ted.
• Noonan, Michael. (Limerick East).
• Coveney, Hugh.
• Creed, Donal.
• Crotty, Kieran.
• Crowley, Frank.
• Deasy, Martin Austin.
• Desmond, Barry.
• Desmond, Eileen.
• Donnellan, John.
• Dowling, Dick.
• Doyle, Avril.
• Doyle, Joe.
• Dukes, Alan.
• Durkan, Bernard J.
• Enright, Thomas W.
• Farrelly, John V.
• Fennell, Nuala.
• FitzGerald, Garret.
• Flaherty, Mary.
• Glenn, Alice.
• Gregory-Independent, Tony.
• Harte, Patrick D.
• Hegarty, Paddy.
• Hussey, Gemma.
• O'Brien, Fergus.
• O'Brien, Willie.
• O'Keeffe, Jim.
• O'Leary, Michael.
• O'Sullivan, Toddy.
• O'Toole, Paddy.
• Owen, Nora.
• Pattison, Séamus.
• Prendergast, Frank.
• Quinn, Ruairí.
• Shatter, Alan.
• Sheehan, Patrick Joseph.
• Skelly, Liam.
• Spring, Dick.
• Taylor-Quinn, Madeline.
• Timmins, Godfrey.
• Yates, Ivan.

Níl

• Ahern, Bertie.
• Ahern, Michael.
• Andrews, David.
• Aylward, Liam.
• Barrett, Michael.
• Barrett, Sylvester.
• Brady, Gerard.
• Brennan, Paudge.
• Brennan, Séamus.
• Briscoe, Ben.
• Browne, John.
• Burke, Raphael P.
• Byrne, Hugh.
• Byrne, Seán.
• Calleary, Seán.
• Colley, George.
• Conaghan, Hugh.
• Connolly, Ger.
• Coughlan, Clement.
• Cowen, Bernard.
• Daly, Brendan.
• Fahey, Francis.
• Fahey, Jackie.
• Faulkner, Pádraig.
• Fitzgerald, Gene.
• Fitzgerald, Liam Joseph.
• Flynn, Pádraig.
• Foley, Denis.
• Gallagher, Denis.
• Gallagher, Pat Cope.
• Geoghegan-Quinn, Máire.
• Harney, Mary.
• Haughey, Charles J.
• Hilliard, Colm.
• Hyland, Liam.
• Kirk, Séamus.
• Kitt, Michael.
• Lemass, Eileen.
• Lenihan, Brian.
• Leyden, Terry.
• Lyons, Denis.
• McCarthy, Seán.
• McCreevy, Charlie.
• McEllistrim, Tom.
• MacSharry, Ray.
• Molloy, Robert.
• Morley, P.J.
• Moynihan, Donal.
• Nolan, M.J.
• Noonan, Michael J. (Limerick West)
• O'Dea, William.
• O'Hanlon, Rory.
• O'Kennedy, Michael.
• O'Leary, John.
• Ormonde, Donal.
• O'Rourke, Mary.
• Power, Paddy.
• Treacy, Seán.
• Tunney, Jim.
• Wallace, Dan.
• Walsh, Joe.
• Walsh, Seán.
• Wilson, John P.
• Woods, Michael.
• Wyse, Pearse.

Tellers: Tá, Deputies Barrett (Dun Laoghaire) and Quinn; Níl, Deputies B. Ahern and Briscoe.

Amendment declared carried.

Motion, as amended, agreed to.