Irish agriculture was never in a better position to avail of the new opportunities that arise for the agriculture and food sector under the national plan. After four years of depression, it is now acknowledged in the official reports of the EC that farm incomes in Ireland have increased well ahead of all other countries in the last two years. I am well pleased that Government policies promoted by my colleagues and myself at home and in the European Community have been so successful.
The income increase of almost 50 per cent over the last two years has not, of course, been enjoyed equally by all sectors in agriculture. Some producers in the dairy sector have enjoyed considerably more than the average figure while small producers and producers in the cereals sector would have experienced considerably less. As Minister for Agriculture and Food, I am determined to ensure as far as possible that application of the benefits under the plan will take account of the disparity of incomes now existing.
There is no other country in the European Community in which the farming sector represents such a crucial element in the overall economy as it does in Ireland. The major beef and dairy sectors provide vital employment throughout the country. Employment in the agri-food sector accounts for almost 20 per cent of the total employment. Exports of food, drink, and live animals exceeded £3 billion in 1988 for the first time, accounting for about 25 per cent of total exports. The contribution of the agricultural and food sector to the balance of payments is proportionately much higher. When account is taken of FEOGA payments relating to agricultural production and exports, estimated at over £1 billion in 1988, and the low level of import content and profit repatriation of the sector, the contribution of the agricultural and food industry to the balance of payments is equivalent to that made by the rest of the manufacturing industry. I should like to point out that there is no repatriation of profits from agriculture; they are all held at home.
There is an encouraging buoyancy in our main production sectors. For the first time since the introduction of the EC milk super-levy system in 1984, the decline in the beef herd has been arrested; market prices for cattle throughout 1988 were in the order of 10 per cent up on their levels a year earlier; the December 1988 livestock enumeration revealed an increase of 114,000 in beef cow numbers and 41,000 in heifers in-calf.
In the milk sector, prices have risen by 40 per cent in less than three years and prices of over £1 per gallon for milk, something that no one could imagine a few years ago, are commonplace. After a difficult year in 1988 prospects for the pigmeat sector are now particularly encouraging. Prices have been steadily increasing since the beginning of the year and this trend should strengthen as the year progresses.
As regards cereals there is an increasing export demand for quality malting barley, and our cereal producers are now very much aware of the need to meet the necessary quality standards which will ensure further expansion of this lucrative market. Current world grain shortages have reflected a reasonable return to grain growers and this situation should continue beyond the 1989 harvest. The agricultural and rural development measures in the plan are designed to ensure that the agricultural sector and our rural community will contribute to, and share in the fruits of, our overall national economic and social development.
These measures will involve the combined efforts of farmers, food processors and others in the private sector, the State and the European Community. Those measures which fall within the ambit of the Community's agricultural fund will cost £1,428 million over the years 1989 to 1993 — I wish some person would convey that information to the backroom boys who prepared Deputy Harte's speech; they did not seem to be aware of that simple fact — of which £344 million will come from the private sector and £416 million from the State, with the balance, £668 million, being contributed by the European Community. In addition, the agricultural sector and the rural community will benefit both directly and indirectly from substantial expenditures within the scope of the Regional and Social Funds, which will, of course, be applied widely and effectively throughout rural Ireland. By any yardstick expenditure of the magnitude proposed in the plan represents a strong vote of confidence in the future of Irish agriculture and in the future of the people of rural Ireland.
The measures which the Government are proposing, and the resources necessary to fund them, will, of course, have to be the subject of negotiation with the Commission, but we are confident that what we are proposing will be favourably received in Brussels.
The FEOGA guidance section has already played a pivotal role in the reshaping of Irish agriculture since our accession to the Community. It helps finance the common policy of improving agricultural structures and in the period from 1973 to 1988 total payments from it to this country amounted to £520 million. That figure is an indication of the significance of what will be done in the next five years. It amounts to almost three times the amount paid since we joined the European Community. A wide variety of schemes operate under FEOGA Guidance Section but I will confine my remarks to four main areas where Community intervention has been of particular assistance to Ireland.
Headage payments encourage the continuation of farming in those areas of the country which have been designated as disadvantaged. The total FEOGA Guidance Section funding of these payments to date is over £208 million. These have proved to be a major contribution to the maintenance of the population and the continued conservation of the countryside.
The food processing sector has benefited from EC investment of £74 million in the form of grant-aid for marketing and processing facilities. Apart from providing an outlet for the primary producer, the food industry is responsible for the enormous export trade which has been established, a trade which has exceeded £3 billion for the first time in 1988. That is an increase of 8 per cent over the figure for 1987. FEOGA Guidance Section investment has made an important contribution to the expansion and modernisation of the food industry, particularly in recent years and, consequently, to the rapid growth of exports.
Under the farm modernisation scheme and the farm improvement programme, the Guidance Section have been effective in promoting on-farm investment for controlling pollution, increasing efficiency and improving quality of products. The Guidance Section's contribution to this investment exceeds £46 million to date.
More important still has been the operation of specific regional measures to meet the problems of farming in the west. Under the western drainage scheme, which is now terminating, and the western package the Guidance Section has contributed £102 million to on-farm investment. The revised western package has now been extended to all the less-favoured areas of the country. The agricultural elements have been redesigned to place emphasis on the solution of the most important problems of pollution, basic winter-housing for stock, fodder and storage.
The decline in the market support mechanisms under the FEOGA Guarantee Section will increase the emphasis on guidance measures in addressing structural and income problems and in enabling Irish farmers to adjust to the realities of agriculture in the future.
The structural problems which beset Irish agriculture are too well known to be repeated. We are all well aware also of the consequences of these problems, particularly the low average incomes and serious under-employment on many farms, especially in the west. These problems, allied to the shortage of non-farm employment, are the main contributors to the continuing migration from rural areas and their consequent decline. The current market restrictions, arising from the changed orientation of the Common Agricultural Policy, tend only to exacerbate the situation and highlight the need for urgent action to find solutions.
However, perhaps this is an appropriate juncture for me to make the point that the European Community is not simply about operating a common market. It is about creating a community and all that this implies. In that context it is understandable that the present emphasis in EC policy, as far as the rural population is concerned, is on seeking ways that will enable people to find prosperity, satisfaction and fulfilment in their areas rather than pulling up their roots and moving to the large towns and cities.
It is against this background that those measures in the plan which relate to agriculture and the development of the rural community have been formulated. I would now like to outline the measures involved.
We did, of course, take a big step forward last year when I negotiated the extension of the western package to all the less-favoured areas of Ireland which, incidentally, now represents 62 per cent of the country. This enabled the people in almost two-thirds of the country to benefit from a measure which was tailored to meet our specific needs. As a result of the revised package we are now in a position to pay grants of 55 per cent for the control of pollution on farms in the areas covered by the package, thereby enabling farmers to make the necessary investment to solve what has become one of the greatest problems for them. I may say, in passing, that the 55 per cent rate of grant is the highest which it is possible to pay under the EC regulations.
Of course, pollution does not stop at regional or administrative boundaries. We are well aware that it is as much a problem for the farmer in the east as in the west. That is why, as part of our plan, we are proposing to extend the western package-type of pollution control measure to all the other areas of the country. Subject to the agreement of the Commission to this proposal and provided the 70 per cent rate of FEOGA recoupment available in the western package is also forthcoming, a scheme will be introduced to provide and enable higher rates of grant for pollution control to be paid in non-disadvantaged areas without the necessity, on the part of the farmer, to draw up a farm improvement plan. This measure is a matter of top priority for me. It is my intention to press for an early decision from the Commission on it. Nevertheless, there are two points on which it is necessary for me to lay particular emphasis. First of all, the requirement relating to prior approval by the FDS of any envisaged works will remain. Secondly, the fact that the plan proposes that the scheme will be introduced at a future date cannot be used as an excuse by anyone for not carrying out work to control farmyard pollution now which he is now legally required to carry out.
While the control of farmyard pollution will have to be a top priority for many farmers in the years immediately ahead — it is, as it were, "an gad is goire don scórnach"— but it will not, of course, be the only item which will call for investment. Later this year, the Community's horizontal regulations governing on-farm investment will be reviewed. The outcome of that review that I will be seeking to achieve will be to ensure that Irish farmers will be put in a position to obtain adequate assistance for measures which will increase efficiency, reduce costs and improve the quality of production. These measures are necessary if farm incomes are to be protected and improved and if primary production is to be geared fully to the needs of a flourishing food-processing sector.
The control of pollution arising from farming operations is only one side of the coin. The other side is the need not only to preserve and protect the environment but to take positive action to improve it where possible. I scarcely need remind Deputies that the protection of the environment and natural resources is a matter of much concern all over Europe at present. Happily, we here have not encountered problems on the same scale as has been experienced in several other countries and long may it remain so. But nevertheless we have to be on our guard lest the situation should deteriorate and we must facilitate the rural community in enhancing their surroundings so that not only they themselves but visitors, both Irish and foreign, will find in our countryside a source of pleasure and peace. To this end, it is one of the proposals in our plan to identify areas which are particularly sensitive from an environmental point of view and to offer incentives to farmers in those areas to conduct their operations in such a way as to retain the character of the countryside, its flora and its fauna, and to protect and guard the rural heritage in all its manifestations.
Diversification of production plays a large part in our strategy for the future of Irish agriculture. The term itself may sound a bit grandiose but plainly and simply what is being said is that the market can no longer absorb all the traditional products and that there is a need to orientate farm businesses towards products for which there is an outlet on European or world markets. Let me emphasise that this is not purely and Irish problem; it is a problem for all farmers in Europe and, indeed, for farmers in most countries of the world. Government policy — and this is stated very clearly in the plan — is to promote the viability of the maximum number of farms in Ireland. To bring that about, however, we must not alone promote increased efficiency, improve quality and reduce costs, but also encourage and assist the farmer to produce only what can be readily sold. This is not as easy as it sounds, because almost all the traditional products are now in surplus. However, there are sectors which are relatively under-developed in Ireland and which have great potential — I mention horticulture, sport horses and on-farm food processing merely as examples. The plan envisages the introduction of the necessary measures to enable activities of that kind to be developed to the full.
A sector which in my view has great potential and for which we in Ireland are particularly suited is rural tourism. Admittedly, this sort of activity may not be new to many Irish farm families. But it seems to me that by and large such developments as have taken place have been the result of individual decisions to invest in tourist facilities which, in turn, were almost totally dependent on passing trade for their utilisation. There is nothing at all wrong which that approach — indeed, many farm families have been very successful in the business — but I do not see it as being adequate for the future. The Irish countryside and Irish rural life have many attractions for visitors but we need to promote and market what we have to offer in a co-ordinated, efficient and planned way. We must consciously plan and create organised tourist facilities of a kind that will offer visitors the inducement to prolong their stays in local areas. That is the proper way to develop the full potential of rural tourism. The way forward, as the plan outlines it, is to place the emphasis on collective effort to provide more and better tourist amenities and to market the group rural tourism product in a coherent and integrated way. Just now, the final touches are being put in my Department to a draft scheme to promote rural tourism under the western package. This scheme will reflect the kind of thinking I have outlined. I expect to announce its details as soon as possible. This new scheme will also serve as a pilot scheme for a wider measure embracing the entire country which can be introduced under the framework of the national plan.
We here think of the on-farm diversification primarily as a measure of supplementing the earning capacity of the farm. Elsewhere in Europe it has a somewhat different constitution. It would be seen as one of a whole set of Community measures aimed at reducing surplus production. As Deputies will be aware, a set-aside scheme to encourage the withdrawal of land from farming for a period of five years is already in operation. This will be followed in due course by schemes to encourage extensification of production — which in practice will mean encouraging farmers to adopt less intensive production methods and, by a further scheme, to encourage the conversion of production from surplus products to alternative lines of production. The extensification measure will be introduced in the beef sector this year on an experimental basis before being applied to all surplus production next year. The introduction of the scheme to encourage conversion must await the finalisation of the relevant EC regulation which is at present being discussed by the Council of Ministers.
I did, of course, during last year obtain the agreement of my colleagues in the Council of Ministers to the extension to Ireland of the Community regulation relating to aids for producer groups. Initially it is to apply in the cereals, beef, sheep and potato sectors. If there should turn out to be a demand to apply it in other areas I will have no hesitation in going back and asking that it should cover other sectors where it is likely to be utilised effectively. Properly availed of, this regulation can be of great assistance to groups of producers who want to organise themselves so as to have more control over the marketing of their products in order to secure greater advantage for themselves. I would also envisage possibilities for contractual arrangements, for example, between producer groups and meat processors to the advantage of both sides and to help tackle the particular problem of seasonality of supply.
The plan fully recognises that, no matter what investment aids are provided, farmers in less-favoured areas will still have to cope with natural disadvantages which, though calling for a greater effort on the part of the farmer, nevertheless result in a lesser return for his labourvis-á-vis his counterpart in the better-off areas. The plan, therefore, envisages that additional support will be available for such farmers' incomes through the greater use of headage payments.
Under our disadvantaged areas schemes it would be the intention to increase the rates of headage payments gradually over the period of the plan, if possible, to the maximum at present permitted under EC rules. The extent to which this objective can be achieved will be dependent on the rate of FEOGA recoupment that will eventually be sanctioned by the Council of Ministers. We believe that there is every justification in accordance with the philosophy that underlines the strengthening of the Structural Funds for securing a recoupment of 70 per cent. If that happens, it will be possible to raise payment rates from their present levels of £32 to about £84 in the case of cattle, other than beef cows, and from £9.50 to about £12,000 in the case of sheep.
These substantial increases in payment rates clearly have the very positive effect of stabilising the farming population in our disadvantaged areas by pumping increased funds into those areas that can be used as both income supplements and extra support to the development of farms in these underdeveloped and handicapped regions. In the long term, this can make the difference between viable and prosperous rural economies and a continuing decline of the areas as a result of depopulation. For this reason, it is of vital importance that the necessary EC funds be secured to implement these planned increases in payment rates.
I expect that the EC Commission will shortly be presenting proposals to the Council of Ministers on this issue. At any Council, my main objective will be to secure the highest possible level of recoupment. I see this as a vital issue for our disadvantaged areas. Increased funding from the EC Commission is also a key element in relation to the extension of these areas and any reclassification of existing areas. As the nationwide survey of areas which I got under way earlier this year is not yet completed, I am not in a position, at this stage, to speculate as to how large the extension or reclassification of our disadvantaged area will be. I do want to make it clear, however, that where the survey results indicate there is a case for extension or reclassification of any particular area, I shall put that case to the Government and EC Commission and pursue it vigorously and persistently.
Since taking office, the Government's policy has been clearly focused at restoring confidence and investment in our agriculture and food industries. The food sector has not been slow to react to the favourable policies which we have initiated. Our food and drink exports have increased from £2.2 billion in 1986 to £3.1 billion in 1988, a growth of almost 41 per cent over the period. This compares with a 31 per cent increase in total exports. It is clear that there is a growing confidence and new sense of purpose in the food industry. This is due, in no small measure, to the stimulus which the revitalisation of Government policy has provided. An essential ingredient in that policy is the emphasis on the importance of the market led approach and the critical need for firms to have a clear strategy for developing their markets. As a result, the State agencies are now targeting their grant assistance towards those enterprising and ambitious firms which are commited to providing quality Irish products for our export markets.
The five year strategy for the food and drink industry published in December 1987 is well underway and accelerated development programmes involving investment of £0.6 billion have been agreed across the various sectors of the food industry. This investment will lead to the establishment of internationally competitive food firms in Ireland having a range of products comparable, and indeed superior, in quality to the best worldwide. Strategic overseas acquisitions by Irish food companies are being encouraged. This will leave the industry well placed to take advantage of the opportunities in the single market of 320 million consumers.
The FEOGA grants scheme to the agri-food sector has made a major contribution to the development of the industry. All sectors of the industry have benefitted from the £140 million EC grants approved to date, but it is worth highlighting the pigmeat and beef sectors as industries that have undergone great change as a result. A major rationalisation programme has been introduced in the pigmeat sector which involves an investment of over £150 million and which will result in a modern efficient industry capable of competing on the international scene for the nineties.
I also welcome the increased investment in the beef industry, particularly in the area of added value consumer products. Indeed, I was particularly pleased to announce recently the launch for the first time of a branded Irish beef product, which will be targeted at the UK and continental markets. This is a major breakthrough for the Irish beef industry and reflects a fundamental change in the marketing attitude of our major meat processors. There is no doubt that we have the expertise and ability to produce quality food products comparable to the best anywhere in the world.
As I have said, these sectors have benefited particularly from EC aid under Regulation 355/77. The total investment in the agri-food industry over the next five years is estimated at £750 million. This represents an enourmous investment in the sector and is indicative of the confidence in the sector of the Government's economic policies. In this year alone, 81 projects, involving a total investment of £150 million, are already in the pipeline and I am confident that the doubling of the Structural Funds will facilitate the financing of this new investment.
Up to this I have been talking mainly of agricultural developments and I would now like to turn to the wider question of rural development. Farming will, of course, continue to play a major role in rural Ireland but I think we all recognise that, increasingly, recourse must be had to the non-agricultural sector to provide the jobs and income required to maintain a stable rural community. I want to stress that farming will be the core of the continued development of the rural community and the other developments will be complementary and supplementary to that.
All the measures to which I have referred up to this will have a developmental impact on rural areas. For example, the industrialisation programme, supported by the Regional Fund, will contribute to rural employment, particularly through the provision of assistance for small and craft industries. The roads programme also supported by the Regional Fund will mitigate the major constraint on rural development represented by our inadequate road network.
As the House knows, the Government have already launched a pilot programme for integrated rural development in a number of specially selected areas. This is the first such programme undertaken on this scale by any member state and its progress is being watched with great interest by the EC Commission and other States who are making a contribution towards the cost of its implementation. At the end of the two year experimental period, an analysis will be made of the results and this will enable us to decide on the overall design of the nationwide programme which will be launched in due course. The results will, needless to mention, be of considerable assistance to the Commission in finalising their own policy on the development and preservation of the rural population. Before leaving this subject perhaps I should say that the promotion of forestry and fisheries will play a large part in this overall intergrated rural development programme but I am sure that my ministerial colleagues who have direct responsibility for these areas will cover them fully.
The overall programme I have outlined is a very broad one extending not only to the agriculture and food sectors but to forestry, fisheries, industry and services. It is asine qua non that its implementation will require new skills, improved standards and better product quality. To meet these requirements we need to develop the necessary human resources and make the maximum possible use of all forms of modern technology. This means training — or retraining, as necessary — advisory staff, educating farmers, both those already on the land and new entrants, so that they may be able to adapt to the new circumstances of farming, providing advice to local communities where it is needed and carrying out all necessary research. To do all this we must not alone maintain our existing training facilities but in addition provide the extra training to meet the special needs of, say, diversification, afforestation and integrated rural development. Support for this will be sought from the Social Fund.
To conclude, I would like to say that I see this plan as a challenge to us all, to the rural community as a whole, to the Government and to everyone involved in any way in its implementation, but it is a challenge well worth meeting. It has been claimed by many commentators that, in the early years of Ec membership, we as a nation did not take full advantage of the opportunities available to us. We are now getting a second chance and we must ensure that we do not miss any opportunities on this occasion. The additional resources which will become available to us from the Structural Funds will be of considerable assistance to us in exploiting the completed internal market. But, essentially, the key to success lies with ourselves. We can choose to take less than full advantage of the internal market and the additional resources from the Structural Funds or we can grasp the opportunities that are opening up to us with enthusiasm and determination. I am confident that the Irish people will respond appropriately to the historic challenge now confronting them.