I am formally indicating my satisfaction at the successful outcome to the talks on the ESB dispute. The consequences for agriculture and for the economy generally would have been enormous had this dispute not concluded satisfactorily and had it lasted for any appreciable time. I am satisfied the dispute has been resolved and I appreciate the readiness of all the parties concerned to reach a conclusion which was in the national economic interest. In talks which I had this morning with the farming organisations, their relief was very obvious. The consequences particularly for the dairy sector at this time of high production would have been very damaging. The dairy sector is not confined only to farmers. It embraces 11,000 employees in the co-operatives and there are also other related activities dependent on the dairying industry. I have no doubt that the partners in agriculture will demonstrate just how much they can achieve in a favourable climate, both from the point of view of industrial relations and economic conditions generally.
The Government's overall strategy in their approach to agricultural development is clearly set out in the Programme for National Recovery. In giving an essential position to agriculture, the programme indicates that policies will be directed towards restoring confidence and investment in the industry and increasing farm income. The programme also indicates there will be a market-driven approach to food production, creating new opportunities for added value and employment, which is a top priority in our economic policies. The measures taken by the Government to date to put the nation's finances on a sound footing and to get the economy moving are already benefiting agriculture as a major key sector in the economy. The benefits as they accrue will not be confined to farmers but will spread to the people as a whole. That is the message I hope I will be able to communicate during my term in office. I hope to demonstrate conclusively that whatever I say or do will not just be in the interests of farmers but in the interests of the people as a whole.
The Government can and will work to provide conditions conducive to agricultural expansion and development. These conditions include, on one side, favourable interest rates, stable or reducing input costs and a low level of inflation. On the other side they involve the best possible arrangements for prices and market support at EC level and arrangements that would enable the industry to make the most of the markets available for high quality value-added products.
On the domestic scene the most encouraging aspect has been the decline in interest rates as a result of the steps being taken by the Government to deal with our national finances. For many years now our farmers have been severely hurt by high interest rates which have increased the burden of debt while, at the same time, discouraging new investment needed to stimulate production. The scene is now changing with the fall in interest rates. The Government are committed to achieving even further reductions in those rates. This can do more than anything else in getting investment, production and employment moving in the right direction at an increasing pace. Success in achieving our objective will also help in the development of the food industry, particularly the value-added aspect which holds such potential for employment expansion.
Another encouraging factor is the reduction in the cost of farm inputs. Over the past year or more there has been an easing of the cost price squeeze which for so long aggravated the pressure on the farming sector. The downward movement in input costs is a welcome addition to the downward trend in interest rates. Further help has been coming from the fall in the level of inflation. The agricultural sector suffered greatly from the high inflation levels here a few years ago because they were not matched throughout the European Community and, therefore, were not reflected in European Community price levels for agricultural products. It is essential that the improved situation be maintained. Costs under all headings must be kept under control if the advances that have been made are not to be lost, if we are not to slip back into the cost price squeeze which bedevilled Irish agriculture far too much over the last seven or eight years.
At marketing and processing level there is great scope for improvement, even greater opportunity for exploiting the openings existing for high quality consumer products throughout the huge European Community market. The Government have shown their determination to do everything possible to make progress in this respect by setting up the office of the food industry with its Minister of State. A major aim is to move towards production of a diversified range of processed products, away from commodity-type trading which has characterised our agricultural industry for so many years. It is particularly necessary to move in that direction at this juncture when the European Community intervention support for several products is being weakened, when agricultural processing interests are being forced to rely more and more on commercial outlets. Naturally, the more successful we are in exploiting market opportunities for processed products the better will be the return to farmers.
The trend in farm incomes in 1985 and 1986 was downward, adverse weather conditions having had a major influence on the out-turn in both years. The prospects for this year are brighter. The Central Bank have forecast a rise of over 7 per cent in farm incomes in the current year. Hopefully weather conditions will enable this improvement to be realised — having allowed for inflation — and will provide some net increase that will offset part of the decline of the past two years.
Of course Irish agriculture is affected by changes in developments in agricultural and food markets world-wide. It is also greatly affected by what happens at European Community level. As a member of the EC we must formulate and operate our agricultural arrangements within the broad scope of the Common Agricultural Policy. That complex and comprehensive policy is an agricultural plan for Western Europe. Within that plan, within the Common Agricultural Policy and in some respects, within the constraints it imposes, we must ensure that our agricultural measures are so arranged and co-ordinated as to maximise our benefits from the Common Agricultural Policy, guiding production, processing and marketing in the right directions so as to realise their full potential.
As is well known the Council of Ministers took a decision over the last few years, and particularly in December last, which had a severe impact on our beef and dairy sectors and which also affects our cereals production.
We can understand the reason it has been necessary to modify common agricultural policies — severe surplus and budgetary problems within the Community along with mounting difficulties in international trade in agricultural produce. Notwithstanding that I have made it a priority to emphasise, both in the Council and in bilateral contacts with other Community Ministers — a number of whom I have met already in the course of special visits — that there must be full and concrete recognition of the impact of such decisions on Ireland. That recognition must be followed by action to redress the balance. I shall pursue that attitude in current price package negotiations and beyond, for example, under the cohesion principle contained in the Single European Act. On the specific matters already being discussed in the price negotiations I shall continue to press for the maximum dismantlement of our MCAs, for changes in the MCA system that would benefit our processed products exports and for fair treatment of our cereals producers. I shall continue to stress that any further changes in the Common Agricultural Policy must be fair and moderate with the necessary compensation or alternatives being offered to producers, that they must be equitable as between member states and must be gradual so as to allow adjustments to take place smoothly.
As well as in the price negotiations there is a further area in which we must have concrete recognition of the impact on Ireland of the Common Agricultural Policy reform decisions taken. This is in the context of Community cohesion now formally and significantly recognised in the Single European Act which aims to give expression to the principle of solidarity between member states. This is not confined to co-ordination of economic policies. It also covers, and most importantly for this country, the idea that the Community should play a major role in helping the economies of the weaker member states to catch up with the others. Since agriculture looms so large in our economy this catching-up process would have to include our farming sector. Recognition of the cohesion concept at Community level is an important achievement for us, one with very considerable potential for benefit. It is very much in our interests that the Community should become more effective and coherent, both internally and as a trading power in the world. The single European Act is a step, though a modest one, in that direction.
It is clear that we have derived very sizeable benefits from Community membership, that opportunities inconceivable before accession have been afforded us. In direct financial terms Community support for the Irish agriculture and food sector has totalled approximately £5.6 billion since 1973, £5.1 billion for market operations and almost £500 million for structural improvements. Perhaps significantly, in 1986 alone, the total transfers under those headings reached a record level of £930 million. The indications are that the transfer this year will exceed even that latest figure.
The commercial opportunities have been almost equally important in the past and in the future will be even more important than the financial transfers. Access to one of the biggest and most promising markets in the world, to a common market of some 320 million people, is an advantage of incalculable importance to a small country providing far more food than it can consume at home. To an increasing extent this opportunity has been availed of by our processors and exporters, though I want to see a much more rapid development in that direction and will encourage it in every way open to me. Together, the direct transfers and higher returns from selling within the Community are estimated to have been about the equivalent of 10 per cent of GNP in 1986. Despite the many problems we have encountered, and still do, with the Common Agricultural Policy no one would want to go back to the earlier position in which our agriculture was dependent on the meagre resources and the small consumer market available at home, indeed on access to just one low-priced external market. In the 14 years since accession we have tried, with some considerable success, to pack into that short period advances in agriculture and food that took far longer elsewhere. Without Community membership we could not have achieved anything like the progress we did.
Since assuming office I have made it a priority to emphasise, both at the Council and in bilateral contacts with other Community Ministers, that the matter cannot be left there. There must be full and concrete recognition of the impact of earlier decisions on Ireland. That recognition must be followed by action to redress the balance. I am determined to maintain that attitude both in the current price package negotiations and outside them until satisfactory results are obtained. The cohesion provisions of the Single European Act give us a much stronger basis than we had before for such action.
The purpose of the Act is to complete by 1992 a process already well under way — the creation of a single market within the Community by eliminating such internal trade barriers as remain. For this country the balance of advantage lies with the success of this effort. There are still residual obstacles to some of our exports arising from national restrictions in other member states. The present agrimonetary system can also create barriers. We will press, and are pressing, for the elimination of all MCAs by 1992 as suggested by the Commission in the current price package negotiations. The completion of the single market will benefit our agriculture, our food sector and, through that, our people as a whole and it is something which we must support.
Another objective of the Single European Act is to make the Community much more effective. That reform is in the overall interests of small member states such as Ireland which depend more heavily than the larger ones on the proper working of the Community institutions. It is worth noting here the existence of another safeguard, the Luxembourg compromise, the so-called veto. This remains untouched by the Single European Act despite many attempts by people to suggest that it does not.
The Single European Act contains a further aim which, although not new, is for the first time being formally and significantly recognised, that is, the principle to which I have already referred, that of cohesion, of expressing the solidarity between member states. This is not confined to co-ordination of economic policies. It covers also, and most important for this country, the idea that the Communities should play a major role in helping the economies of the weaker member states to catch up with the others. Obviously, as agriculture is such a large sector of our economy, it will have to be included in this catching up process. Recognition of the cohesion concept at Community level is an important achievement for us and one that has a very considerable potential for benefit.
A further aspect of the Single European Act is the emphasis on environmental questions. The Act foreshadows Community measures aimed, among other things, at preserving the environment, improving its quality and using resources prudently and rationally. I am quite satisfied it would enable the Government to protect our environment against any spillage from Sellafield much more effectively, contrary to what has been suggested by those who argue that the Single European Act will put us in such a position that we will have no right even to protest against Sellafield emissions and overspill. We all know the growing and justifiable demands throughout Europe for better treatment and increased care of the environment. This, in turn, is putting pressure on the farming sector to conform with a variety of environmental aims. These pressures will develop whether or not the community decide to take a hand in the matter. The Community should now take the problems into account and should be prepared to deal with them on a basis of solidarity.
In the course of a recent round of bilateral discussions with my colleagues, almost every Agriculture Minister in Northern Europe, notably those in the Federal Republic of Germany, the Netherlands and Denmark, raised as a matter of specific and vital importance within their responsibility for agriculture the question of the protection of the environment. It is a matter of vital importance to such an extent that the Danish Agriculture Minister is Minister for Agriculture and the Environment. That demonstrates how important it is for us to maintain a pure, healthy, clear environment in regard to agricultural production to maximise the potential of the export of our products to a market in Europe that is becoming ever more conscious of pure food and healthy products to the extent that they are now imposing taxes on the unnecessary and undue use of fertilisers. That is another great advantage for us in the European development to which I felt I should refer at this stage. Irish agriculture has distinct natural advantages. We must ensure that our environmental protection laws protect the pure uncontaminated quality of our products.
The Single European Act helps to provide for progress in the Community's effectiveness and for progress in Ireland's economy. It is a positive and useful development and one which we must not evade or undermine. That view is shared by the Irish farm sector in general and with good reason. The Single European Act is a logical development of the earlier Community treaties to which we freely gave our assent. These matters, together with the prosperity of our farmers and our population as a whole, as distinct from some of the red herrings that have been raised in recent times, are the issues at stake in the referendum on the Single European Act.
This year's budget includes £341 million gross or £182 million net for agriculture but that must be put in the context of FEOGA transfers of well over £1,000 million anticipated for this year. It puts the whole European scene in context. This allocation seems to be a reduction on the allocation for 1986 when gross expenditure was £375 million or £240 million net. The main factors involved in the reduction are: the elimination of food subsidies, £15 million; non-recurring expenditure and weather damage relief measures, £18 million; lower market intervention costs, £9 million; transfer of university faculties to the Department of Education, £10 million; and increased receipts of £30 million, including once off receipts from the European Communities in respect of the disadvantaged areas schemes and farm modernisation schemes.
Taking these factors into account, there has been a reasonable increase this year in the provision for agriculture over 1986. This means that given the very difficult financial position and the general severity of the budget, agriculture has fared comparatively well. It demonstrates the priority which the Government attach to this primary productive sector in our economy, On top of the voted expenditure, my Department disburse very large amounts of FEOGA funds for the benefit of agriculture. As I already indicated, last year these totalled £930 million and this year they will be considerably more.
I will now turn to some of the main sectors in agriculture. The milk sector is very much in a watershed in its development. Arising from decisions taken in December and in March in regard to the Community milk regime this sector is entering a critical and challenging phase. With effect from 1 April last, milk quotas have been reduced by 6 per cent. This means that our processing sector will have less thoughput available. A certain amount of existing plant and capacity will have to be reorganised. That is the negative side. There is no denying that this situation will create problems for milk processors.
However, there are positive aspects. The reduced quotas will ensure that greater balance will return to the milk sector and the requirements of the commercial market should again become dominant. It is clear that without remedial action as regards the level of production the future of the milk sector was in great jeopardy. Already there are signs of a return to market buoyancy. The skim milk market has been quite satisfactory since the beginning of this year. Bord Bainne have secured some attractive contracts and as a result we do not expect to have to rely on intervention for skim milk powder this year. Because of the improved powder market Bord Bainne have been able to increase their prices and this in turn means a better price for the producer.
The objective of Government policy is to create the framework and the environment for progress and diversification. Milk producers and processors alike operate in a commercial environment. At processing level some difficult decisions and choices will have to be made. In particular more resources will have to be devoted to research and development. However, there is often a misconception about new products. Completely new products which would transform the industry overnight would naturally be very welcome, but it is usually more a case of improving and adapting existing products, improving packaging and presentation, developing new markets and, above all, ensuring that whatever we produce is of the highest quality and is geared to the requirements of the market.
It is generally recognised that cheese production has considerable potential but we need to broaden the scope and variety of our production. Cheese consumers tend to be very discerning and a much better marketing effort is required here. It is clear also that further investment will be required in the milk sector. The recent decision to restore FEOGA grant assistance for projects in the milk industry is an important breakthrough.
It is also necessary to have an economic climate in which investment will be encouraged. By pursuing the key objective of restoring order to public finances, the Government are creating the proper economic environment with the level of interest rates that will make investment more attractive. Because of the high cost of supporting the beef market and faced with continuing heavy cow slaughterings resulting from changes in the dairy sector, the European Community decided in December 1986 on a number of changes in the beef regime. While the immediate effect of the new measures has been a drop in the price of steer cattle, prospects for the longer term are good. In the short term, we can expect Commission action possibly through the export refunds and private storage mechanisms to get surplus beef off the market, but in the longer term it is likely that a better supply-demand balance will emerge in Community markets providing scope for expanding our beef exports to other member states. It is important that we have the raw material to make the most of these opportunities.
Total cattle numbers are lower today than they were ten years ago and as most of the cows for the beef industry come from the dairy herds the milk restrictions will affect future beef production. However, this can and must be offset by an increase in the beef breeding herd. I am pleased with the major campaign being mounted by ACOT to encourage the wider use of the suckler system and, in particular, I would urge dairy farmers not to reduce their cow herds but to consider engaging in beef production side by side with dairy operations.
The beef export industry is one of the most dynamic in the country and its achievements in recent years have been noteworthy. Live cattle exports have been greatly reduced and more and more beef is being exported in processed and partly processed form. This is a matter to which the Government are giving priority and, in co-operation with my Government colleagues, I hope to be in a position very shortly to announce a major package in this direction because we believe we must diversify from the trend of exporting cattle on the hoof to maximum added value in the processing sector. As I said, the Government are making this their priority and we will be demonstrating that by action rather than by words in the very near future.
There are a number of impediments in the way of achieving greater development nonetheless, and I am talking about such obstacles as the discouragement of processing because of the absence of MCAs on uncooked meats. Success in removing these obstacles will not be easily achieved but I can assure the House that I will do all in my power to achieve this. I have made this a major item in the current European Community price negotiations to ensure that our food processing sector will not be under the disadvantage of having export charges by way of negative MCAs on their products.
There is also the need to ensure that farmers produce the type of cattle customers demand. While CBF and ACOT have a role to play in getting the message back to farmers, the primary influence on what are basically commercial decisions is the price the farmer gets for his animals. I appreciate that meat factories have their own commercial decisions to make, but I urge them to give due weight to quality aspects in their cattle pricing arrangements. This will be in the long term interests of the factories themselves and of the industry as a whole. Hitherto, there has been inadequate attention to quality in cattle pricing. How can one ensure that farmers produce the right type of beef unless good quality is rewarded and poor quality penalised?
Over-production of cereals has been causing serious problems in the European Community. Over the past decade Community intervention stocks have increased tenfold and the Commission have estimated that unless the problem is effectively tackled surplus production and carry-over stocks in the Community could reach 80 million tonnes in the early nineties, with an annual storage cost of over £2 billion. Such a figure is of course unthinkable and would have very serious implications for the Common Agricultural Policy. The Government programme for national recovery recognises the role which cereal production is capable of playing. There will always be a need to import some hard wheat to provide the type of flour we need for the baking of long life bread, but we are capable of producing the rest of our wheat requirements. There is also a market in Northern Ireland. The production of quality malting barley is another sector with possibilities. There is a good home market and in recent years exports to other member states have been developed. The most vital factor is quality and those who export anything but top quality produce are only damaging a potentially lucrative trade.
Because of the serious budgetary difficulties facing the European Community efforts to curb cereal production are now in the forefront of Commission's cost-cutting proposals. The Commission have proposed lower intervention prices for feed grain and a significant weakening of intervention. Because our interest rates are high these proposals, if adopted, will have grave consequences for Irish cereal producers and, accordingly, I have been opposing them very strongly.
Community cereal production is undermined by large-scale imports of cereal substitutes. In 1986 more than 30 million tonnes of these substitutes came into the Community, including the better part of 1 million tonnes into Ireland. There is a marked reluctance on the part of some member states to come to grips with this problem and under the GATT compensation would have to be paid for any restrictions imposed. However, action against substitutes is a course which I will continue to advocate and which I have been proposing in the context of the bilateral discussions and at the Council of Ministers meetings.
I will add a brief word about an issue which is of vital importance and which I will be pursuing further, namely, the suggestions for changes in the disease eradication schemes. At this point, I have an open mind on the most appropriate structures. This is an area which is the subject of ongoing discussions with the farm organisations. While not wishing to prejudge the outcome of those discussions, I can say that my attitude will be determined by a need to have a more effective scheme to safeguard our substantial export interests and to provide the best value for money for farmers and taxpayers alike.
Earlier this year, the European Council of Ministers approved a measure to implement the new Community policy in the field of social structures. This measure will be adopted in the form of regulation when the necessary procedure for consulting the European Parliament has been completed. The new policy is based on the fact that the Community is no longer prepared to encourage increased production and that, for the future, capital investment aids for farmers must not lead to an increase in the production of products which are, or will be, in surplus. The aim will be to encourage farmers to improve the quality of their products, to reorientate production in line with the requirements of the market, to diversify into non-traditional enterprises and to adopt or continue such farming practices as will assist in the conservation of the environment and the protection of the countryside.
When the regulations come into effect, we, in common with other member states, will have to draw up a scheme to encourage farmers to extend their areas of production. A participant in that scheme — and it will be voluntary as far as the farmers are concerned — will be able to qualify for an annual payment related to the nature and extent of the undertaking into which he is prepared to enter and to the loss of income which he will sustain as a result. For an initial period, the scheme will have to be applied in the cereals and beef sectors but a member state may opt to apply in other sectors as well. It will not be easy to devise an appropriate scheme which will be suited to Irish farming conditions. Nevertheless, my Department will be undertaking this task in the months ahead. Initial discussions are now taking place at official level and new proposals have been made by the Commission in regard to direct income aids for farmers affected by the restrictive prices policy and also on a proposal for a farmers' retirement scheme. It is too soon to go into the details of this new set of proposals which have been widely mentioned in the press and which I have no doubt will be the subject of much discussion at the Council of Ministers.
We will have to be very cautious in our approach to the incomes aid proposals which could prove a very real danger to the future of the Common Agricultural Policy. In the case of disadvantaged areas, there is the question of reclassifying the less severely disadvantaged handicapped areas as more severely handicapped and it is well to be absolutely clear about financing. No provision was made in their Estimates by the previous administration for the payment in 1987 of any of the total £15 million cost of such a proposal to which the former Minister for Agriculture referred at the conclusion of his contribution. I know he made an announcement in County Cavan that the Government would provide a sum of £15 million as their contribution to this proposal but it is important to record that no provision was made in the Estimate for that sum.
The European Commission has expressed reservations about paying the same headage grants in what are now the less severely handicapped areas as are paid in the more severely handicapped areas. The main reason is that the enabling Directive requires the rates of grants to effect differences in the severity of the natural handicaps from one area to another. My Department are in constant contact with the Commission about this matter with a view to having it resolved satisfactorily. I am also engaged in the necessary preparatory work in the reorganisation of a review of disadvantaged areas. This and the subsequent field inspections will take many months to complete and we will then have to secure European Community approval for our detailed proposals which I will be presenting as soon as possible.
The Government's programme for national recovery places special emphasis on horticulture and we have already published a comprehensive document entitled, "A Policy for Horticultural Development" in which we envisage a number of key elements for the revitalisation and future development of the industry. Within our short period in Government we have already implemented some important aspects of our strategy for this sector. We have established an office of horticulture within the Department of Agriculture and Food and we have appointed a Minister of State with special responsibility for the overall development of the industry. In that connection, I have been able to rearrange and reorganise the staffing structure within my Department to ensure that the Minister of State with responsibility for horticulture and the Minister of State with responsibility for food have adequate and effective staffing structures. In the course of my overall co-ordinating role, I will ensure that there will not be any barrier across the path of these essential priorities of Government through lack of staff.
We have also established An Bord Glas and their broad objectives are to promote the development of all aspects of the industry with a view to increasing output, achieving a reduction in the current level of imports, increasing exports and generally creating employment. We propose to draw together, under the auspices of the board, all the services currently provided to the horticultural industry and thus enable it to take a new, radical and comprehensive approach to its undoubted potential for expansion. The establishment of a body such as An Bord Glas requires statutory authority and we will be proceeding as quickly as possible, with the necessary legislation. It will be evident from the legislation which I will be introducing in the House within the space of the next few months that, by contrast with the outgoing administration, we will ensure the necessary statutory base in legislation across a whole range of areas to underpin our proposals for development of the economy, particularly through agriculture. I will be introducing Bills in relation to slaughter houses, dairies, horse breeding and others in the foreseeable future which are an essential element of my responsibility as Minister for Agriculture and Food.
As Deputies are aware, the process of legislation takes some time and will necessitate examination of existing structures. I am speaking here about An Bord Glas and the need to have consultation with interested parties. However, it is a measure of the importance and urgency which the Government attach to the development of the horticultural sector that they have already set up an interim board as a tangible step towards a full, statutory authority. We see great potential in horticulture and we have full confidence in the abilities and commitment of the people involved in it. With proper organisation, much can be achieved. In addition to whatever steps they can take towards our overall objectives, the board will help to ensure that when the statutory authority is established there will be no hold-ups and that the development work started by the interim body can continue without interruption. The office of horticulture will assist in the examination of the present service available to the industry and will put in train the preparation of the necessary legislation to which I have already referred. The seraratio vices of the office will be available to the interim board to give every help and assistance possible in their work. I am satisfied that the objectives we have set for the rejuvenation of horticulture are realistic and achievable. With the help and co-operation of all concerned in the industry, we intend to achieve them.
The Government also place particular emphasis on the development of the food industry and to that end they have restructured Department responsibilities to provide for the needs of a modern, developing food sector. A criticism often levelled at the State's handling of the food industry is that it lacked a single focus as a result of a number of State agencies and Government Departments. On coming to office the Government set about reorganising State resources in order to achieve maximum potential and the best use of public moneys. To this end the Government have transferred the food functions from the Department of Industry and Commerce to my Department. Within the Department of Agriculture and Food, an office of the food industry has been established and a Minister of State has been given special responsibility for it. I stress that that is not to suggest that food is not as important an element in my responsibility as agriculture because the two are inevitably and inextricably interlinked. The quality of the primary producer underpins the whole food industry. With my two colleagues, we will have a constant and integrated approach to the Department of Agriculture and Food. While these are significant developments, I see them as but the first steps in tackling the problems in the food industry. An integrated approach to the entire agriculture and food sector is required and the Government will facilitate, as far as possible, this approach so that the food industry can swiftly adapt to changing patterns and needs of the consumers in the home and export markets.
There is now general acceptance that our food industry will have to move away from its traditional production patterns into value added consumer ready products. I am determined to ensure that diversification into these products will not be hampered by quality deficiencies. State agencies have been directed to stress the necessity for quality in their dealings with companies seeking assistance. The IIRS are currently examining the possibility of adapting an internationally recognised quality management system in the food industry. The message to the industry is that quality pays and that management effort to achieve top quality will show results in the marketplace. The Government recognise the strategic importance of the food sector and its great potential for increased employment.
State measures are now geared towards providing a suitable environment conducive to growth. This policy takes cognisance of the fact that the marketplace must take priority. I am confident that the arrangement being put in place in my Department and by the Government will ensure that the potential of the sector will be realised.
In the areas of education, research and training, which are vitally important, I acknowledge that while allocations for ACOT and AFT have been tightly drawn, in common with those for other State agencies generally, in the obvious interest of the Government's determination to reduce public expenditure and to bring about a climate for investment of the kind we have recently seen emerge, with low interest rates, it is nonetheless the Government's objective that these bodies will continue to play essential roles on a cost-effective basis in the development of the agricultural industry which is central to the Government's programme for recovery.
In regard to research, An Foras Talúntais continue to respond to the challenges posed by the changes in Community policy. The intensification of work on food technology, on cost efficiency, quality products and new products and processes reflects the changing scene. In the formulation of research programmes, special attention is being given to such areas as biotechnology, alternative farm enterprises and use of information technology in accelerating the dissemination of research findings. At the same time, raising efficiency levels in established areas of production will continue. We are not going to fall behind any other country in terms of the amount of time and attention given to research particularly in the area of agricultural research and technology. This is the only way to guarantee success from the primary producer right through the food processing sector. I want to assure the House and the people that this will be a major priority as will be evident in the policy statements of the Government in this area.
ACOT have also made significant progress in the training area. Their target of bringing 80 per cent of all new farm entrants into the certificate in farming is well on the way to achievement. Let me say in passing that what we are competing against are countries which make it a condition of inheritance in agriculture to have in some instances a third level qualification in agriculture. That is what we have to compete against and beat. That is why I am laying such stress on it. I am glad to say that the European Commission has now approved ACOT's scheme of vocational training under the structures regulation. This scheme incorporates all ACOT's principal courses, including the green certificate and residental college courses. Operations under the scheme are now expected to qualify for FEOGA aid at 50 per cent in the disadvantaged areas and at 25 per cent elsewhere. This development will be of great help in maintaining the momentum of ACOT's farm training programme in the years ahead.
Agriculture has traditionally occupied a key position in the Irish economy. We are not going to rely on traditional attitudes and ways. Agriculture will continue to occupy a key position in the Irish economy on the basis of the application of knowledge from the first stage right through to the final stage in what is going to be a highly processed added value activity under the Department of Agriculture and Food. It would be remiss of me not to express my thanks to the greatest power of all for the excellent weather conditions since I came into office as Minister for Agriculture and Food. Despite the difficulties of recent years, the past two years in particular, and the restrictive measures at European Communities level, the industry is capable of maintaining its leading role in the economy. Even though there are production constraints in some sectors there is still considerable scope for development not only by way of increasing the volume of production but also through increased processing and improved marketing of what is produced. We are part of a market of some 320 million people. We have free access to that market and I am quite sure we can make the most of the opportunity to exploit its potential.
