1983 was a good year for farming in Ireland. We had the highest growth in real incomes in the whole of the European Economic Community. Listening to Deputy Noonan, one would not think that that was the case. The growth in real incomes in 1983 was 3½ per cent, whereas some countries suffered a serious decline — West Germany, for instance, suffered a decline of approximately 20 per cent in real farm incomes. It was a considerable achievement to show a growth in incomes when virtually every other country in Europe was registering a decline, significant in some cases.
I shall reply to a few points made by Deputy Noonan. He talks about the imposition of penal levies by this Government. I should like to point out that these levies were originally imposed by a Fianna Fáil Administration in 1979, when farming was in the throes of a dreadful depression. They were imposed at approximately twice the rate of the current levies. Therefore, it is not correct to talk about an imposition. The proper expression would be a reintroduction of levies which have existed for some years from 1979.
The veterinary inspection fees are not levies; they are fees to cover the cost of inspections at meat factories. They have been there for a great many years and are not a new imposition. They cover only 70 per cent of the cost of veterinary inspections in those factories.
Deputy Noonan spoke about the dismal failure of this Government in the talks on the proposed milk super-levy. I should like to point out that the original Commission proposal of July 1983 was that milk production in every member state would be tied to the 1981 level of production, plus 1 per cent. The latest offer made by the Greek Presidency at the Athens summit meeting early in December was that Ireland be allowed to produce milk at the 1983 level, plus 10 per cent. Since that Athens meeting I have not met one farmer in the whole of this country who had anything but praise for the Government's negotiating tactics at those talks and I have yet to hear one. That was a startling improvement on the original proposal. However, as the House knows, we stated that it was not acceptable to us.
On the other hand, let me point out that a number of countries have vehemently opposed our getting an exemption of any description. They opposed that final offer made by the Greeks at that Athens summit meeting. Those talks resume next Monday in the Council of Agricultural Ministers in Brussels. I want to re-emphasise that there is nothing but praise for the manner in which we have conducted those talks to date. We intend to continue our resolute stand with regard to our opposition to the Commission's proposal.
Has Deputy Noonan forgotten that a Fianna Fáil Government of the 1977-1981 period introduced a resource tax and a 2 per cent levy on farm commodities which was just about the most unpopular move that was made against our farming community and agriculture in modern times. Of course, that 2 per cent levy had to be abandoned. The Deputy talks about the recent budget having done nothing for agriculture: it has done a lot for agriculture. It certainly did not set out to penalise people producing agricultural commodities, as did the resource tax and the 2 per cent levy.
We have on our hands at present, where the economy is concerned, a much tougher battle than the Fianna Fáil administration had from 1977 to 1981; but they were the people who imposed the penal taxes and penal levies. We did not impose any additional capital taxation on agriculture in the recent budget. However, Deputy Noonan has been advocating a land tax, at a time when farmers are extremely sensitive about their whole future because of the attempts by some of our fellow members in the EEC to dismantle the Common Agricultural Policy. This is not the time to talk about introducing additional capital taxation or land tax.
I was glad to see that Deputy Noonan's Leader, Deputy Haughey, contradicted his agricultural spokesman last week and said that no land tax would be introduced by a Fianna Fáil Government. He had to do so: the reaction of the farming community and the farming organisations was so intense there had to be a retraction. Politically, it was highly unpopular, economically, it was highly undesirable. I am glad to note that the Opposition leader has placed the matter in abeyance.
I do not know from where Deputy Noonan gets his information about disenchantment among the farming community. The farming community are relatively happy in these very tough times. In 1983 they did quite well. I noticed in today's opinion poll in The Irish Times that one of the groups most satisfied with the Government's performance was the farming community. That is the best evidence available to me. If Deputy Noonan has some other magical secret source as to the disenchantment or otherwise of the farming community we would all be intrigued to hear about it. But that opinion poll speaks for itself. It verifies what I have said about the reasonably good year our farmers had in 1983, about the rise in their real incomes.
Reverting to the milk super-levy controversy for a moment, I did say that the negotiations recommence next Monday. We hope there will be a successful conclusion to these talks at the March summit. It is essential that we reach a solution at that meeting of Heads of State in March because, as we all know, the Community has run out of money. Over the past three weeks we have seen the effects of this when the Community has made some very serious proposals regarding cuts in spending in agriculture. If there is not agreement in March I am afraid the cuts we have seen will constitute the tip of the iceberg only, that there will be considerably more serious and harsher cuts because the money just is not there. However, if we do reach agreement on the super-levy proposal it will mean a cut-back in the amount of milk produced and particularly the amount of milk paid for. Therefore, we shall not have to have the all-round type of cuts which would follow automatically if that summit collapsed.
Worst of all, if that summit were to collapse there is a fear that the super-levy proposal might be abandoned completely. I use the word "fear" in a very deliberate manner because, if the super-levy proposal does not go through, the alternative will be much worse. The alternative mentioned is a direct cut in prices which would have far more serious repercussions for this country than anything else, far more serious implications. Therefore, we are concerned that the production of milk in Europe be curtailed but we are insistent that we should not suffer as a result. That has been our stand all along and will continue to be our stand.
I am hopeful of a satisfactory outcome to that March summit. I might say that the Athens summit did not collapse just because of disagreement over the milk super-levy proposal. There was not agreement on any point at the Athens summit, whether they were financial guidelines, future financing of the Community, the British budgetary refund or the accession of Spain and Portugal — there was not agreement on any one of those five major points. Therefore, it is incorrect to say that that summit failed because of disagreement over the milk super-levy proposal. It was a component only of the overall disagreement.
Another point on which I want to correct Deputy Noonan is his amazing statement about the Government spending millions of pounds on the extraction of oil off our coasts. The Government do not involve themselves not alone in extraction but even in exploration for oil. That job is done by oil companies who operate under licence from the Government, but there is no cost to the Government. That was an incredible statement. I could not believe an Opposition spokesman could be so ill-informed. And we have not even reached the point of extraction; we are still exploring. Hopefully the find off the Waterford coast will be commercial and, if it is, we shall start thinking about extraction, but even then the Government will not be involved in contributing to its cost. That is a matter purely for the oil company concerned.
Notwithstanding the difficult economic climate there have been significant and favourable developments in the national economy and finances in 1983. Inflation fell from over 17 per cent in 1982 to 10½ per cent in 1983. The high balance of payments deficit was very substantially reduced last year. Industrial exports grew by some 14 per cent in volume terms, while manufacturing output increased by some 6 per cent. The overall Exchequer borrowing requirements as a proportion of GNP fell by more than 3 percentage points and, as a result of Government action in the last two budgets, has now been brought back below the 1979 levels.
These favourable developments have also been evident in the agricultural sector. Gross agricultural output increased by some 3 per cent in volume terms to stand at its highest ever level. This was facilitated by growth in cattle, milk, sheep and pig output. As a result of increased input usage, net agricultural output increased by about 1 per cent. Allowing for other farming expenses and subsidies, total farm incomes increased by over 11 per cent in nominal terms and by about 1 per cent in real terms. Adjusting for movement in the labour force, per capita real farm incomes increased by some 3½ to 4 per cent.
1983 represents a second year of growth in gross and net agricultural output while farm incomes have increased each year since 1980 in nominal terms and since 1981 in real terms.
Despite these improvements in the national economy and finances, we continue to face an uphill battle. The steps taken to rectify the public finances during the past year were necessitated by the excesses of earlier years and must be followed through by a continuation of greater discipline in public expenditure, reduction in borrowing and the eventual elimination of the current budget deficit.
After two decades of considerable economic growth, the years since 1980 have seen a virtual standstill in the economy. Our population has grown by almost 4 per cent so that GNP per person in this country has declined by 4 per cent over the past three years.
In the face of the declining national incomes per head it is not surprising that there has been a sharp and extremely worrying increase in unemployment. The underlying trend in unemployment is still upward and we must all be seriously concerned at the consequences of this trend unless it can be reversed very soon. We will, however, only succeed in sustaining our present level of employment and creating new jobs if the growth in production costs is brought down below the level prevailing in competing countries. The Government's policies are designed to do this. This means that we must achieve a substantial reduction in the level of annual price increases from the present 10 per cent so far this year to a level of around 5 per cent.
The reduction will have to be achieved in spite of the difficulties we face in reducing our current budget deficit and in the trends in exchange rates, particularly against the dollar.
As well as the considerable progress in reducing inflation in the past year we have also made great strides in reducing our balance of payments deficit. The estimated outturn for 1983 was under £400 million compared with over £1,400 million just two years ago. While this improvement is most welcome, it has to be accepted that it is due in considerable measure to the present recession, and renewed growth at home could well lead to a substantial disimprovement in the external trade situation.
At the same time the national Exchequer position continues to give rise to serious concern. The budget deficits of recent years meant that we had to resort to borrowing from abroad on an extensive scale. This in turn has created a large commitment to repayments over the coming years. Between now and the end of this decade we will have to find in excess of £1,000 million a year to finance the repayments of external Government debt without allowing for any addition that may arise from any new debt or refinancing over the intervening years. I have seen comments that the problems of the Exchequer are only a matter of bookkeeping and that in some way that means they can be ignored. This attitude is a deliberate and unscrupulous deception. Just as any household or any commercial firm cannot go on running up large debts and expect a continuous subvention from the local bank manager without any regard to meeting his demands for repayment, we cannot as a society go on living way beyond our means and expect foreign bankers to go on supporting us. The plain fact of the matter is that we will only get their support as long as we can continue to improve the external trade situation and pursue domestic budgetary policies that will reduce further our reliance on external funding. As the Minister for Finance indicated in his budget speech, borrowing, especially foreign borrowing, has been reduced and the growth in public expenditure, which has been the core of our fiscal problems for a decade, has been curbed.
There are in practice two overriding issues which need to be given absolute priority if the economy in general and agriculture in particular is to recover from the very serious financial situation of the past four years.
The first of these priorities is to reduce inflation to a level that would ensure that we maintain competitiveness on export markets and that the incomes both of farmers and those in other occupations are at least maintained in real terms. After the favourable developments of the mid-seventies many sectors, and especially the agricultural sector, have seen a considerable fall in their income since early 1979. This has arisen from the ravages of inflation. In the case of farmers the prices they received for their products over the past four years have been eroded by the rapid increases in the prices they paid both for their production inputs and for the consumer products on which they spend their net family incomes.
Obviously in the face of such a situation the desired expansion of agricultural output is not attainable. The reduction of inflation is, therefore, a critical element of any policy measures which are taken to raise farm output. It is evident that, over the next few years at least, farm price improvements from the normal annual price fixing arrangements of the EEC will be restricted. In these circumstances the real prices of agricultural products received by farmers can be maintained only if the sharp downward trend in inflation over the past year is sustained. I might point out, a Leas-Cheann Comhairle, that as well as speaking about the proposed milk super-levy on Monday next we will also be having initial discussions on 1984 farm price proposals. Those price proposals do not make very happy reading but we could hardly expect otherwise when the financial situation in the community is so difficult. Nevertheless, we will be demanding an increase on the proposals which have been put before us. There are no increases at all proposed in some sectors such as milk and cereals and very minimal proposals in other areas. However, I am sure we will be supported by many other countries who also find the position unacceptable.
Policies to counter inflation are, however, not easy options. They can only be achieved if difficult and unpopular fiscal and monetary policies are pursued relentlessly. In this pursuit it is inevitable that all sectors, including agriculture itself, will have to bear the burden. This burden should not be more onerous on farmers than it is on other sectors, but they cannot escape it altogether.
The second priority in both our agricultural policy and economic policy generally must be that of improving the economic efficiency of production in Ireland. In the case of agriculture the contribution to the economy and the level of farm incomes enjoyed by farmers and their families are determined to a major extent by the level of efficiency achieved at farm level.
A major improvement in farm efficiency requires a deliberate and concentrated effort by the farmers themselves and by the Government agencies involved. In particular the focus must inevitably be on the programme and achievements of ACOT. It is essential that the advisory and educational work of ACOT be specifically orientated towards securing a substantial improvement in efficiency at farm level. This objective must be brought to the forefront of the policies pursued by farmers on their own farms. The aim of the business policies pursued by individual farmers must be to achieve higher net incomes through a more efficient use of the basic resources which are available. This would secure not only a better income for the farmer and his family but also a greater contribution by the agricultural sector to our national economy.
An improvement in efficiency will require in many cases the adoption of a suitable development plan. The adoption of such a plan will not in itself, however, automatically generate greater efficiency. It is the achievement of greater efficiency, where necessary through the adoption of a development plan. Which is of overriding importance. This primary objective should never be lost sight of in the policies pursued in the agricultural sector. Unless this objective can be realised the contribution of agriculture to the Irish economy will decline, the farm labour force will fall further and the return to the large investments made over the past decade will never be forthcoming.
If we are to overcome the economic problems that now confront us we must have an honest evaluation of the resources available for new developments. Long lists of demands which have no regard to the availability of resources are a positive handicap to generating the realistic development of our national economy. There are no difficulties in suggesting programmes and ways in which money can be spent. The need is to generate the vast amounts of resources required to finance these programmes. Our primary commitment to national development should be a commitment to generating additional resources, not to finding additional ways of dissipating what we have today.
The argument that we have to have large spending programmes in order to achieve worthwhile national growth is a fallacy. Unfortunately, that was the policy which was pursued from 1977 to 1981 with such disastrous results. If large-scale Exchequer expenditure were the way to increased national prosperity, we would not be in our present economic predicament. Digging holes and filling them up again was not a very clever economic policy. Indeed, given the scale of public expenditure over recent years we would have few economic problems left to resolve. But sadly that is not the case.
In the context of the very difficult financial situation facing the Government I am satisfied that the amount allocated this year for agriculture is reasonable. For some Departments the 1984 allocations are at or below the 1983 figure. Others show some increase on the 1983 figure. Agriculture falls into the latter group.
The gross allocation for 1984 at almost £370 million is 10 per cent higher than 1983 and the net allocation at £263 million is some 2 per cent above 1983. That seems to have been missed by Deputy Noonan. These figures reflect the fact that all schemes or aids aimed at increasing productivity and at mitigating the effects of the recession on the farming sector have been retained and adequately funded in 1984. In addition to the sums published in the Estimate, the Government as a budgetary measure are providing an extra £5.8 million for agriculture, £5.7 million of this is for the continuation of the AI and lime subsidy schemes to the end of this year. These schemes first came into operation in 1981 and have been instrumental in raising inseminations to their present annual level of over 1,300,000 and lime usage to over two million tonnes. Under existing EEC regulations the schemes are due to expire at the end of April but it is my intention to seek their extension. The continuation of the subsidies for those schemes comes up for consideration in the context of the discussions on prices in Brussels and we will be seeking their retention. I am hopeful that we will be successful. The artificial insemination scheme in particular has been one of the most successful schemes ever introduced here and we are particularly keen that it be retained.
The balance of £100,000 is being provided as aid for the potato industry. We are all aware of the difficulties facing the industry and clearly there is a need for improvement in the presentation and marketing of the product if we are to compete effectively with imports. The object of the aid is to encourage producers to rationalise the industry and in this regard moves are already afoot to establish a national potato co-operative. There have been major difficulties in the potato industry since 1980 when our status as a plant disease free zone was eliminated by a direction from the EEC and we now have to allow imports of potatoes. That has caused immense difficulties for our potato industry because the imported potatoes were better presented than the Irish products and our potato growers lost a sizeable proportion of the market. In 1982 the value of potatoes in processed or unprocessed form amounted to £25 million. I heard Deputy Noonan complaining about £100,000 being inadequate, but this is the first time any Government have made an attempt to put our potato industry on a sound footing. The protection our potato growers had up to 1980 is gone. In 1980 and 1981 Deputy Noonan's Government made no attempt to put our potato market on a sound footing. Therefore, I fail to see how he can complain about the inadequacy of a sum when his own Government did not even provide a penny.
There is much public disquiet at the level of potato imports and food imports generally. A figure of £750 million is often quoted as representing the current annual value of foodstuffs imported. I can go along with that figure but it is important to distinguish between food imports which might be considered absolutely necessary and those which could be substituted by home production.
It is of interest to examine the composition of the £750 million of imports to which I have referred. One hundred and fifty million pounds worth is accounted for by live animals, meat and meat preparations, £130 million by cereals and cereal preparations, £120 million by tea, coffee, sugar and sugar preparation, £110 million by feedingstuffs for animals and £90 million by fish, dairy, poultry and other products. The balance of £150 million relates to vegetable and fruit imports. Of the total of £750 million an analysis undertaken in my Department estimates that £200 million is substitutable by home production and £50 million of this latter sum would relate to vegetables and fruit.
The public have the erroneous impression that we import £750 million worth of fruit and vegetables and it is assumed that all this food could be produced at home but that is not the case. Only about £200 million could be produced here. I do not mean to be derisory when I say only £200 million could be grown at home because that is a vast amount of money and we must do everything possible to produce as much as possible of that food at home. Setting up the potato co-operative is a step in the right direction and perhaps steps will be taken to set up fruit and vegetables co-operatives to combat these imports. As I said, the bulk of these items cannot be produced at home. I know they have a beautiful climate in west Cork but they cannot grow bananas or oranges and that point is not taken into consideration. Of that £750 million, £550 million could not be produced at home and that point is often ignored or not understood.
I consider that there are reasons why imports of foodstuffs which might appear capable of substitution by home-produced goods have been taking place. Firstly, our agricultural industry is based to a very high degree on the output of livestock and livestock products and in consequence tillage and other crops are of less importance. The second factor is the seasonality of supplies from the Irish agricultural sector. This has tended to hinder the sustained development of a domestic processing sector as well as necessitating the importation of certain out-of-season fresh products. The third reason is the limited size of the Irish consumer market. That is a very important point which is very often ignored. It often happens that continental countries, like France, produce vast quantities of certain commodities and when they have an oversupply it suits them to sell that overproduction to Ireland and other countries at a very low price and that kills the indigenous industries. I am thinking particularly of the apple industry which has taken a terrible beating in the past ten years, largely because the French are producing a vast quantity of apples which they sell at dirt cheap prices. It is very difficult to prove a case of dumping in the European Court.
The size of the Irish consumer market has also tended to discourage the development of a comprehensive food processing sector here, leaving many areas of our consumer market to be supplied as an adjunct to the British market by British or multinational firms. Fourthly, is the reluctance of Irish food manufacturers, resulting to a considerable extent from the size of the home market, to develop new products to cater for changing consumer tastes and economic circumstances. Fifthly, is the high level in recent years of Irish production costs; and the final factor is the lack of overall strategy among producers, manufacturers and wholesalers for the regulation of supply and the marketing of their goods on the domestic market. It is only in the context of such strategy that supply contracts with the retail outlets, particularly supermarkets, can be won and competition from overseas suppliers overcome.
In considering the total foodstuffs imports of £750 million we must not lose sight of the fact that we are also a large exporter of foodstuffs. Our current exports exceed £1,500 million per annum. In other words, we export exactly twice as much food as we import. The bulk of the imports and exports are with other EEC countries. Our membership of the EEC involve us in a free trade situation and our food imports must be viewed in that context. We get this stupid argument from time to time that we should stop importing potatoes, apples and vegetables, but we cannot do that. We hear about the obstructionist tactics of the French and we are asked why we cannot adopt similar tactics. We are in a very vulnerable position within the EEC because we export twice as much food as we import. If we were to get involved in a dirty tricks campaign to stop food imports, retaliatory measures could be taken which could decimate our food industry. It is not a very clever idea for people who are net exporters of food to be tampering with food imports. The disgraceful episode we saw in Dundalk last year when potatoes were dumped overboard from an importing firm did not do any good for our name in Europe. We are too dependent on our exports to be fooling around like that.
Accordingly, unilateral action to limit foodstuffs imports would be impractical and indeed very unwise. Our ability to substitute for imports with home-produced products is clearly limited, but it would appear to me that there is great potential for increasing our exports of foodstuffs by specialising in those areas where we have a competitive advantage. The success of the Government in reducing inflation will be of benefit in this regard. Our overall interests might in the long run best be served by concentrating on maximising our exports of feedingstuffs particularly those which have been processed.
All of us have already heard and read a great deal about the current debate on the future of the EEC. That debate is an extremey wide one and goes far beyond the issues most frequently commented on in this country. In fact, it springs from the growing and deeply felt need to relaunch the Community, to give it a new impetus, a new dynamism and a place in the world commensurate with its real economic weight.
That was the spirit in which the Heads of State and Government looked at the Community's future when they met in Stuttgart last June. The outcome of that meeting was that the European Commission was asked to examine the problems facing the Community and to make such proposals as were deemed necessary. The Commission was to concentrate its work on certain specified areas. These were the review of existing policies including the Common Agricultural Policy, the development of new policies, the future financing of the Community, the accession of Spain and Portugal and the budgetary contributions of member states. As Minister for Agriculture, I am primarily concerned with two of these policy areas, namely, the review of the Common Agricultural Policy and the future financing of the Community. Needless to say, both of these problems are closely linked, since the operation of the Common Agricultural Policy is responsible for almost two-thirds of the entire spending of the Community.
That is an interesting point that often attracts people's imagination, or their ire, or whatever you wish. They ask: "Why do you spend so much time in Brussels discussing agriculture? What about other things like health, education, social welfare and industry?" The fact of the matter is that the Common Agricultural Policy is the only fully developed policy the Community has. We have a regional policy and a social policy, but they are not fully developed. They are not comprehensive. We spend so much time on agriculture because over two-thirds of all the money in the Community is spent on agriculture. So it is rather imperative that we make sure we get as much of that as we can. Hence the length of time we spend debating agriculture particularly at this time of the year when the price negotiations commence.
To deal with the financial problem first, it is true to say that for some time past the Community has been very preoccupied with its financial resources and the prospect of an inadequate budget in the fact of ever-increasing costs. That preoccupation or fear was justified as the recent deterioration in the Community's finances shows. The fact is that on the basis of current estimates the Community budget for 1984 will be insufficient to meet expenditure on the operation of existing policies, let alone the development of new policies or other unforeseen expenditure. The Community has, in effect, reached the limit of its current revenue resources. This is why the Commission has been obliged already this year to introduce certain unpalatable changes in the management of the Common Agricultural Policy in order to cut back expenditure and live within its budget.
It is clear then that the situation confronting the Community and its future financing is a very serious one, and it would be foolish to ignore that background in considering the future of the Common Agricultural Policy. I think this factor is too often overlooked or not fully appreciated. In fact, it is at the heart of the Community's problems. Indeed, if the Community is again to regain the momentum of economic development that it enjoyed in its formative years, it is vital that a satisfactory solution is found to its future financing. Because of the fundamental nature of the issues involved and their implications for the future of the Community and its member states, the current negotiations are the most complex and far-reaching ones for this country since we joined the Community 11 years ago.
The financing of the Community is rather complex and very often not fully understood. Some of the finance is obtained from customs duties, but the bulk of the finance is obtained from the revenue of 1 per cent of the proceeds of VAT in each member state. That source of revenue proved to be quite sufficient up to last year but, towards the end of 1983, the Community started to run out of money. The ceiling of the Community's income was reached and expenditure was beginning to outstrip income. That means there must be a restructuring of the Community's financing. In other words, the contributions to the Community's budget must be increased.
The proposal put forward by the Commission last July was that the proceeds from VAT should be increased from 1 per cent to 1.4 per cent. We welcomed that because we are a net beneficiary from the Community. The more money there is in it, the better it is for us. The Greeks went a little further than the Commission and proposed that the VAT contribution should be increased to 1.8 per cent. That was better still for us. By nature we are a very greedy nation and the more they provide the better we like it. When I say we are a very greedy nation I mean we are a very greedy race.
That increase has not been agreed upon because the net contributors to the Community budget have said they will not increase their contributions unless spending is brought under control, and specifically unless spending in the agricultural sector is brought under control, and more specifically still unless surpluses in the agricultural sector are eliminated or significantly reduced. Hence the proposed milk super-levy. The British and the Germans in particular who are the main net contributors to the Community's budget are adamant that they will not increase their contributions until such time as there is a restructuring of the Common Agricultural Policy, in other words, that the production of certain commodities is brought under very rigid control.
The general thrust of the Commission's proposals was to impose stricter controls on the Common Agricultural Policy and in particular to curb the growth of surplus production through a more restrictive market policy and through measures designed to reducing the cost of the Community's agricultural expenditure. In its report, the Commission recognised the importance of the Common Agricultural Policy to the development of the Community as well as the special characteristics of agriculture. It also stressed the need to adapt agricultural policy to the conditions which now prevail and to ensure the most efficient use of the available financial resources. It pointed out that the problem of over-production of certain products — notable milk and cereals — was of critical concern given the limited market outlets available and the burden which the disposal of surplus production places on the Community's budget.
I think that no one would quibble greatly with the Commission's general assessment of the difficulties confronting the Common Agricultural Policy. It has to be acknowledged that some changes of the policy are inevitable and that some sacrifices will have to be made to ensure its survival. It is certainly not in Ireland's interest that the future operation of the Common Agricultural Policy should be jeopardised by the chaos that could develop if the necessary measures are not taken to deal with the current problems. Our apporach to the debate then has been to ensure that the basic elements of the Common Agricultural Policy are preserved, that its principles are maintained, and that any measures to rationalise the policy or solve its problems are non-discriminatory, fair and equitable not only between member states and regions but also between different categories of farmers. This is where we take issue with some of the proposals put forward by the commission, and especially the proposed super-levy on milk.
Community milk production has been increasing rapidly and this has resulted in a massive build-up of stocks of butter and skim milk powder. There are now about a million tonnes of skim milk powder and some three quarters of a million tonnes of butter in intervention stocks. At the same time there has been a marked deterioration in the world market for these products, and there is no real commercial market available for much of them. The Community is thus faced with major problems in the disposal of its dairy stocks at the same time as it is faced with a critical financial situation. The Commission's proposals envisage a fundamental change in the operation of the system for milk by providing for the imposition of a super-levy on the production exceeding the 1981 level plus 1 per cent. This super-levy would work out at about 70p per gallon in Ireland. We accept that corrective action is needed to curb the growth in the Community's milk production, but as I have said any such action must be fair and just, and must take account of the level of development of the dairying industry in the different regions of Community. The super-levy would discriminate against our producers, would freeze our milk production, would impede or halt development in dairying and have extremely serious effects on our whole economy.
Agriculture is of major importance for our economic and social progress, not only for rural areas but for the entire country. In this country the milk industry is five times more important to the economy than in the Community generally and average milk yields here are some 20 per cent behind the EEC average. It was for these reasons that the Government have been strongly opposing the Commission super-levy proposal. I have been gratified by the recognition for Ireland's special position, expressed by many of our partners in the lead-up to the Athens Summit. However, the matter was not resolved at the Summit and we shall be having tough and difficult discussions on it in the coming months.
I now refer to the operation of the bovine TB eradication scheme. This scheme commenced almost 30 years ago and despite all the criticism it has been reasonably successful. When it started 17 per cent of cattle were affected by TB. The present incidence is 0.2 per cent, a very considerable reduction, and it is incorrect to say that the scheme has been a failure. However, I am not satisfied with the rate of progress in eliminating the disease. The level of eradication has barely decreased in recent years. Considering what we are spending such a massive amount of money, we cannot be satisfied with that. As announced recently, I am re-examining the whole strategy involved and I would hope that as a result we would come up with some new ideas to achieve a further decrease.
I have set a target of reducing the incidence amongst herds to less than 1 per cent in three years' time. The incidence in animals is 0.2 per cent but the incidence in herds is 2.6 per cent. I want to reduce the incidence from 2.6 per cent to less than 1 per cent. That is a reasonable goal and with the co-operation of everybody involved, farmers, veterinarians and the Department of Agriculture, we can achieve that target.
I would now like to deal with measures to encourage on-farm investment. In this regard the Government have provided the sum of £37.6 million to be expended in 1984 on the farm modernisation scheme, the western drainage scheme, the programme for western development and the EEC interest subsidy scheme.
The farm modernisation scheme which implements EEC Directive 72/159 on the modernisation of farms was introduced here in 1974. The scheme has provided a comprehensive framework of grant aid towards capital expenditure on farm development works. Since its inception over 105,000 farmers have participated in the scheme and over £255 million has been disbursed in grant aid.
Following the suspension of grant aid for buildings and fixed assets in February, 1983, a detailed reappraisal of the farm modernisation scheme was undertaken with the object of introducing revised guidelines to ensure that the scheme would operate in the most productive and efficient manner possible. Submissions were considered from many organisations connected with the Agriculture industry. In carrying out the review my Department were conscious of the criteria and conditions laid down in EEC directive 73/159 under which investment in farm development may be assisted. Accordingly any proposal for changes in the scheme outside the framework of Directive 72/159 could not be considered.
In considering the grant levels and scope of the revised scheme it has been necessary to try to balance the need for agricultural investment with the availability of Exchequer resources at a time of severe financial difficulty. Accordingly it is necessary to concentrate resources in the most essential forms of investment. The highest priority is the provision of suitable housing for livestock. As many as 2 million cattle are outwintered in Ireland. This results in a considerable reduction in the economic return from the national herd. In some cases also, outwintering causes severe damage to land through poaching — land which may well have been improved with the aid of Exchequer resources. In the circumstances the emphasis in the revised scheme is on basic livestock housing.
The principal feature of the revised scheme introduced on 3 January 1984 are:—
(a) The standard costings used to determine the level of investment to be grant-aided have been increased substantially.
(b) The range of structures and fixed assets eligible for grant-aid has been revised to put the main emphasis on livestock housing.
(c) The "Other-Low" category has been excluded because of the need to channel scarce resources into the most productive areas as well as the desirability of encouraging older farmers to hand over their farms to their heirs.
(d) In the case of commercial farmers aid will be by way of interest subsidy, equivalent to a grant rate of 15 per cent.
(e) For development and "Other High" farmers the rates of grant are being reduced by five percentage points in the case of farm buildings and an average of about fifteen percentage points in the case of land improvements.
Certain elements of the farm modernisation scheme which were discontinued last year are not being reintroduced. These are grants for mobile equipment, guidance premiums, grants for keeping farm accounts, and the group fodder scheme. Grants for tourists and craft projects and for incremental livestock are also being eliminated.
