I join with my colleagues in extending every good wish to Deputy Hyland on his appointment as Minister of State at the Department of Agriculture and Food. As a near neighbour of mine in Kilkenny. I can say that his commitment to agriculture and his involvement in the agricultural industry over the years will be of great benefit when he is putting together the appropriate policies to ensure a brighter future for the troubled agricultural industry.
The Land Commission Bill introduced in 1989 resulted in the dissolution of the Dáil. I hope that history will not repeat itself on this occasion. The efforts that have been made to dissolve this historic body have been many and varied and go back to 1984. However, I expect we will succeed on this occasion.
The system of land tenure prevailing in Ireland is almost exclusively owner-occupancy. This system evolved between 1870 and 1923 from an unsuccessful landlord-tenant system which had been imposed on the country by British conquest between the mid-16th and mid-17th centuries. Unfortunately, the need for land reform in Ireland is as critical now as it was in 1870. It was in that context that the Land Commission were established as a State agency that would bring about agricultural viability and at the same time introduce new entrants to agriculture, a plantation method. It became an extension of the work that had been carried out by the Congested Districts Boards in the 19th century.
The total agricultural area in Ireland which can be utilised is around 5.7 million hectares. One might think that this is a tremendous amount of land to cater for the small island of Ireland but everybody knows there are great structural problems varying from one region to another.
Land is unique in that it is fixed in location and limited in supply. Consequently the relationship between man and land is central to the structure of rural society. Therefore the rational allocation of land between the competing demands made on it by society is both a delicate and complicated matter. The records of our courts will show that there have been more internal and external family disputes relating to the ownership or otherwise of lands than any other issue before the courts. Land is such a delicate issue that it conjures up the potential for friction in communities that is unlikely to be surpassed.
However, because of our unique dependency on agriculture it is undoubtedly in the interests of both the agricultural sector and the national economy to have the maximum amount of land utilised to produce value-added products in spite of surplus production in the European Community generally.
When one looks at the present structure of farming in Ireland it is obvious that there are major obstacles to achieving maximum utilisation. The census of population in 1986 shows 22,111 farmers aged 65 years and over. In addition there has been a trend towards part-time farming and the removal of marginal land from active use which has been accelerated in recent times by a reduction in product price through reduction in supports from the Common Agricultural Policy.
The facts, coupled with the extent of conacre, would suggest less than full utilisation of the land in Ireland. There is a general misconception that massive land resources are mobilised through the land market each year. The reality is that approximately 3 per cent of land changes hands through ownership changes but by far the largest proportion of land, 84 per cent of changes in ownership, is transacted through inheritance and gifts. Accordingly, if we are to make any impact on land mobility, it will be through financial inducements in the area of inheritance which will generate the greatest impact.
Various measures have been introduced by successive Governments over the years to include stamp duty exemption, relief under the capital acquisitions tax code, young farmer installation aid, farmer retirement schemes, tax incentives for long term leasing; but in spite of all of these important incentives there are many people in Ireland today who still find it difficult to relinquish the reins of ownership, and indeed more so in recent times when there is a general reluctance on the part of new entrants to agriculture to take over the reins of ownership in view of the uncertain aspects of a viable standard of living on agricultural holdings in the future.
Undoubtediy the most significant problem in agriculture is the persistence of low and volatile incomes. It is particularly striking that this problem should remain even after a period of very strong growth in overall agricultural income. Indeed the disparities in incomes in the agricultural sector would seem to have widened since 1973, particularly because of the structural characteristics of Irish agriculture and the rural economy. It appears that the increased output of Irish agriculture in the seventies or indeed subsequently was provided by a minority of farmers. The remainder occupying the large proportion of agricultural land were unable for a variety of reasons to respond to the strong incentives offered by the Common Agricultural Policy. This dichotomy in the agricultural sector has been investigated and found to coincide closely with the age, education and marital characteristics of farmers, as well as farm size and regional properties. The persistence of low incomes and the narrow base of the progressive sector reveal the existence of very severe structural and other problems in the Irish economy. This is stated in an NESC report into the problems of Irish agriculturevis-à-vis the changes in the Common Agricultural Policy.
It is widely accepted throughout the European Community, and becoming more so in Ireland, that the achievement of adequate farm incomes requires the inevitable reduction in the numbers employed in that sector. Indeed, various studies have indicated that the minimum variable size of holding for grassland production is increasing over time. This implies that we will have more adjustment in land structures over the next decade. One would have to say that, in spite of the activities of the Land Commission to make more farmers viable and to increase their holdings and introduce new entrants to agriculture, the underlying structure which was being preserved was one which sustained inadequate income levels in a period of relative agricultural prosperity.
It also appears that the policy since our entry to the European Community failed to induce significant change in the size and structure of agricultural holdings. One will recall that the former Minister for Agriculture, Mark Clinton, established an interdepartmental committee on land structural reform during his term of office in the mid-seventies. This report identified three characteristics of the Irish land tenure system which were obstacles to improved land use. First, there was the predominance of owner occupancy; second, the strong sense of attachment to the family holding and, third, the prevalence of short term leasing. The committee concluded that these inflexible features of our land tenure system constituted the major barriers to development of the country's agricultural industry. The proportion of farm holdings with total incomes below the 50 per cent relative poverty line, with an income less than half the average industrial wage, almost doubled since our entry to the EC. This is hard to believe, in spite of the net Common Agricultural Policy transfers to the economy which rose as high as over 10 per cent of GNP in the early eighties but which have been declining gradually since 1980 itself.
Obviously the age profile of our farming population has been largely responsible, in addition to the structural problems of agriculture, in failing to respond to the opportunities given to the agricultural sector since 1973. In addition there has been no national land policy to develop or re-orientate the rural economy since the mid seventies. There has been alaissez-faire attitude to the problem of Irish agriculture so long as the net transfer of aid from the European Community continued to flow into the Irish economy. In recent years one can only conclude that the chickens have come home to roost.
It is vital that the current EC philosophy on maintaining the rural society does not provide a veil on inherent structural problems in Irish agriculture. A properly co-ordinated rural development programme is urgently required. In particular this programme must effectively improve the structural efficiency of agriculture.
More and more of our aid is coming from the Community through various compensation payments for reduced product price. However, thousands of farm families are undergoing tremendous financial pressure and it is cold comfort to them that there is a problem at EC level in respect of the payment of the special beef premia, suckler cow premia or other payments. There is no source of income whatsoever coming into the family farm at this time of the year except those payments.
Mansholt failed in his objective in the early seventies to destroy rural communities, but Commissioner Ray MacSharry has succeeded in one fell swoop through his proposals and through the encouragement of the Euro barometer in reducing commercial Irish agriculture to subsistence level. He is closing down the engines of agricultural productivity and replacing them with the "cheque in the post syndrome". That appears to be the mentality and the policy which Deputy Michael Kitt would wish to make permanent in the Irish agricultural industry. I hope the new Minister of State, Deputy Hyland, who comes from a part of the country where we still depend on the weather, will actually ensure that the commercial farmer in this country will continue to have a vital role to play in agricultural productivity.
The MacSharry proposals are not thought out properly. His alternative proposals of treating farmers as hewers of wood and protectors of the environment are insufficient and no substitute for a proper land reform policy.
The need for a modern and effective land policy and programme is now more urgent than at any time in the recent past. We have an ageing population and an increasing capital cost of establishing on a farm today. It is ironic that these are the facts of life at a time when we are dissolving the Land Commission, especially when we consider the historic contribution that that body made to viable farm families and holdings throughout the country. Production quotas, environmental factors and the trend towards extensification all combine to increase the area of land required to generate our given level of income.
The State has in the past through the Land Commission built a land policy around the notion of purchasing land and redistributing it to smallholders. It is totally unacceptable to me to abolish the Land Commission today and fail to replace it with a new land agency to formulate and implement a new land use programme to bring about an economically sustainable and acceptable land tenure and ownership structure.
We need an agency that will implement the objectives of the President of the European Commission, Jacques Delors, when he stated that the general thrust of European agricultural policy would be to maximise the number of viable farm family units on the land. Since he made that statement in County Wicklow he has unfortunately failed to back it up with properly constructed and co-ordinated policies.
In the past 20 years the number of farm families has fallen from 180,000 to just 90,000 full-time farmers. On further examination of these figures it is clear that most of the reduction has taken place in the farming category under 30 acres. This has obviously major implications for the structure of rural society and the income distribution in rural areas. More and more land is required to meet the average household income today than was required 20 years ago.
It is now accepted that it would take at least 90 acres of good agricultural land to earn a similar income to that of the average industrial wage and your income from agriculture will be largely determined by whether you have a milk quota or not. It is generally accepted that a 40,000 gallon milk quota on a 90 acre farm is required to have that type of income. This is the type of huge structural change that has taken place in rural Ireland without any reference to the implications for rural society or any preconceived planning for the entire agricultural industry. Is it any wonder then that the various incentives I referred to earlier are not working to increase land mobility?
At the same time as there is a huge reduction in farm incomes, the State continues to penalise inter-family transfers through the capital acquisitions tax code. The Minister for Finance and, indeed, the Taoiseach, fail to understand the damage that this penal taxation regime is causing to the commercial agricultural sector through the enactment of the various Finance Bills over the past couple of years. I call on the Minister for Agriculture and Food today to use his good offices in the preparation of the Finance Bill to amend thresholds in the Capital Acquisitions Tax Act, 1976 to ensure proper account is taken of the value of agricultural land.
The introduction of contributory pensions for farmers takes away a valuable incentive for transferring farms. The farmer no longer needs to transfer his farm in order to qualify for a pension. Retirement schemes have failed to encourage land transfer in spite of EC Council Regulation 1096/88 which allows for a lump sum payment to a farmer who retires at age 63 or earlier and which has never been implemented in Ireland. The young farmer installation aid scheme, a proper retirement scheme and a realistic capital acquisitions tax threshold could mean a new impetus to land mobility in Ireland which gives the farmer a specific work routine, plenty of social contact and the social standing of one who is providing for his or her family in contributing to society and job creation in agriculture.
It is reasonable to expect that, with the downturn in agricultural activity and the reform of the Common Agricultural Policy, there will be an increasing amount of land coming on the open market in coming years. Thus, it is essential that some regulatory authority be established to ensure that this land is used for agricultural purposes rather than speculative development. It is important that full-time farmers gain access to this land rather than people from the professions who seek only to obtain the holding for future capital gain or as a family playground. I contend that the land market between now and the end of the decade should account for most of the transfer of land rather than the amount of land that has been transferred by gift or inheritance to date.
It is essential that proper safeguards and the financial framework are now put in place to assist potentially viable farmers obtain additional land. The central thrust of any new land agency should be to reform the current land market and to increase the ability of the medium-scale farmer to compete with other land purchasers in the open market so as to bring about a more economic and socially acceptable land tenure system. Unfortunately, reduced access to capital from the financial institutions and anomalies in the income tax code create a bias in the land market against small and medium-scale farmers. Two very important and fundamental ingredients are essential for new entrants to viable farm holdings in relation to access to land. First, we must have a well qualified and educated work-force in agriculture that will be able to meet the challenges and opportunities of Common Agricultural Policy reform and, second, the same income tax concessions available to persons and companies outside of agriculture should be available to people directly in the industry to finance the purchase of agricultural land to offset interest costs on borrowed capital and so on.
Perhaps reform of the tax code in this way would have a moderating influence on land prices and would give an opportunity to the farming sector to purchase agricultural land thus reducing the competition from the non-farming sector. It is unrealistic to expect any restructuring of land and essential subsequent development of the enlarged holdings in the absence of fixed repayments or income-related long term finance.
The country and financial institutions have failed to devise any system of financing capital for land purchase which takes account of changing conditions over a long period. Substantial amounts of money for long term investment can be raised in the money markets with the backing of a State guarantee where the rate of return to the investor is 1 per cent to 2 per cent in real terms.
The best example of this particular method was through the Housing Finance Agency established by the Government to provide more housing in 1981. That body borrowed £300 million over five years and, unfortunately, the experience has not been one of success for many borrowers. Nevertheless, we should learn from that experience and apply this type of system of financing to land purchase.
It is ironic that the State has an agricultural bank at its disposal — through the ACC — to establish a similar type of agency to raise long term capital under State guarantee but it does not have the political will or the foresight in terms of long term planning to initiative such a scheme.
The country has one of the highest real levels of interest rates in Europe and the financial institutions are making huge profits. Consequently there should be a fund at fixed levels of interest which could be made available for agricultural development. There is no consistency in the way in which security policy is implemented in the financial institutions today. There is no consistency in the manner of economic development or agricultural development here that takes account of lending policyvis-a-vis the economic conditions of the day. In good times money is literally thrown at people and in bad times banks feel they will never have the repayment made on the day on which it is due.
An enlightened approach to the availability of finance for agricultural development is essential in order to ensure that the engine of agricultural activity, namely, the commercial farm is equipped to cope with the onslaught of product price reductions which Commissioner MacSharry is intent on implementing.
Any new land agency should have responsibility to ensure that all land transfers are monitored and that detailed statistical information on land transfers and leases be published annually. At present there is a huge information gap on the question of land policy and it is difficult for any agency or Government to make decisions on land restructuring without any idea of the trends in respect of land mobility taking place at present.
The attack on rural Ireland from the European Community, the reduction in direct income support from the State and the huge socio-economic changes that are taking place throughout rural Ireland should provide the necessary impetus for the Government to implement radical and planned changes in our rural development policies that will ensure viability for as many farm families as possible and retain the population of rural areas intact at a time when there are little or no opportunities outside agriculture.
I urge the Minister to bring together the farm organisations as soon as possible to discuss a replacement of the Land Commission by establishing a new and dynamic land agency. Another factor which makes this agency even more important is the mobility that is taking place in terms of the milk quota and the need to monitor the transfer of milk supplies from one region to another on a national basis.
I commend the thinking of farm organisations like Macra na Feirme and the Irish Creamery Milk Suppliers' Association on their thought-provoking and enlightened approach to the issues of land reform. All farm organisations could make a valuable contribution towards the establishment of a dynamic land agency. In respect of this matter I was disappointed to note in the Minister's speech that he was content to leave the issue of land policy to market forces and, because of the downturn in agricultural support from the European Community, he was of the opinion there was no need for a new land agency or that any impetus be given to a land use policy.
Legislation was enacted recently by the Houses of the Oireachtas in respect of land bonds. This has given an opportunity to the Minister for Agriculture and Food to review the land annuities paid by farmers for lands acquired by these farmers from the Land Commission over the years. The problem of many farmers in meeting their bi-annual payments to the Land Commission is now a cause of serious concern. It is estimated that there are approximately 6,000 farmers with serious arrears problems with the Land Commission. The question of withholding various premium payments from the Department of Agriculture and Food and, indeed, the fact that some cases have been dealt with through the sheriff has highlighted the escalating problem with these repayments.
Many of the farmers have had to resort to applying for social welfare but many are deemed ineligible as they cannot claim the annuity as a legitimate expense. The problem of high annuity occurred mainly in the period 1978 to 1982 when a combination of high interest rates and high prices led to a very high payment being arrived at. Many of the farmers who got land at that time would have been better off if they had never got it in view of the millstone they have put around their necks. The highest interest rate payment was 18.25 per cent and in some instances the payment per acre was as high as £180 per annum. This problem has been compounded by the reduction in farm produce prices and the introduction of milk quotas.
The outlook for many of our farmers is bleak. It is estimated by the Irish Farmers Association that arrears owing to the Land Commission are of the order of £5.4 million and that these arrears will rise significantly in the years ahead.
Radical measures are now required to alleviate the problem and I am glad the Minister for Agriculture and Food has set up a working group to examine the issue. In view of the fact that the Minister is now abolishing the Land Commission and that he has vested himself with powers under the Land Bond Act, 1991, this is an opportunity for the State to dispose of all properties, through a tenant purchase scheme at a knock-down price. The precedent for such a scheme is well known to the Department of the Environment. The State, under a generous buy-out scheme, gave tenants the opportunity to become owner-occupiers.
People with holdings, which were acquired from the Land Commission, and who made their repayments on time, should be considered in drawing up any scheme in the future.
I know of many farmers who bought their properties from the Land Commission using funds borrowed from financial institutions. Should consideration be given to holders of property presently vested in the Land Commission similar consideration should also be given to farmers who have paid on time and have worked with great difficulty to meet their financial commitments. It would be very unfair if farmers who have paid their way and have borrowed money at high rates were not given concessions or did not receive consideration while those who have not been in a position to make their land annuity repayments were the only ones to receive consideration under a potential land buy-out scheme. Indeed it would be grossly unfair if farmers who are in arrears, through no fault of their own, were the only ones to receive consideration. I hope the working group established in the Department of Agriculture and Food will take this into account.
In October 1984, the Government announced that it was their intention to abolish the Land Commission. Eleven estate officers were informed, through their trade unions, that it was proposed to transfer them from the Department of Agriculture and Food to the Department of Social Welfare, on a temporary basis. The functions of the estate officers it was proposed to redeploy were the rearrangement of land, commonage division, group purchase, the letting of lands, the collection of Land Commission annuity arrears and so on. It was proposed that they be redeployed to the Department of Social Welfare as investigation officers they would be involved in checking on recipients of unemployment benefit and so on. However, there was no negotiation with the estate officers at that time and they were not transferred or redeployed because the social welfare officers' union objected.
In 1987, the estate officers were transferred to work in various district court offices around the country, effectively as clerical officers. This represented a unilateral alteration of their terms of employment. Again, there was no negotiation with the affected officers. Effectively, the Minister for Finance and the Minister for Agriculture and Food, were in collusion and actingultra vires, without any consultation. They were in breach of the contract of employment of the estate officers when they decided that they should be redeployed.
There was added urgency to get rid of the Land Commission estate officers in 1987 because the farm tax office had been abolished and the redundant officers had to be accommodated in their former Department. As the House is aware, the estate officers of the Land Commission operate under the aegis of the Department of Agriculture and Food and were appointed following an open competition held by the Civil Service Commission under the Civil Service Commissioners Act, 1956. They were appointed under regulations made under that Act.
In summary, the estate officers were deemed to be holders of posts created by an Act of Parliament. Their conditions of service were embodied in a document entitled CS13/121/68 which was furnished to the estate officers at the time of their appointment. The estate officers decided to instigate a judicial review of their redeployment which eventually led to a full blown High Court case. Effectively, the estate officers deemed themselves to be in the permanent service of the Department of Agriculture and Food, that their assignment to the Department of Justice was wrong, that the Minister for Finance and the Minister for Agriculture and Food had exercised powers that were unlawful and were purporting to derogate from the applicants' original appointment.
The Minister for Finance at the time, Ray MacSharry, introduced a voluntary redundancy scheme. A number of officers applied and were successful. However, the High Court case continued and the outcome was that the Department of Finance were deemed to have failed to have due regard to an estate officer's reasonable expectations to continue in the Land Commission until the office was abolished by an Act of Parliament. Today tributes have been paid to the Land Commission for the work they have carried out. I wonder, therefore, in the light of these tributes why these estate officers were treated so harshly.
On 24 July 1989 Mr. Justice O'Hanlon gave leave to the estate officers to put their case to the High Court. Initially, the Department of Finance and the Department of Agriculture and Food failed to file a defence because of their incompetence in the matter. Eventually, the Department of Finance had to settle out of court. On 11 December 1990 a settlement was reached on the following terms: that the Minister for Finance was agreeable to the termination, with effect from 4 January 1991, of the assignment of the estate officers, who numbered 11, to court officers; to reinstate them as local officers with the Department of Agriculture and Food; the Minister was also prepared to agree to the application of many of the estate officers for the voluntary early retirement scheme, which was previously offered to them and he was prepared to re-engage some of the estate officers who had successfully applied under the scheme earlier once they repaid certain sums of money which they had received.
This detailed High Court case which I have just outlined, is a measure of the incompetence of the former Minister for Finance, Ray MacSharry, and the former Minister for Agriculture and Food, Deputy O'Kennedy, in their dealings with the Land Commission and their treatment of staff. It is another indication of how the Government's control of public moneys has been absolutely disgraceful. Effectively, the Ministers in question had broken every rule in the book in respect of the employment of personnel in the Department of Agriculture and Food, in particular in the Land Commission, without any hint of remorse from the Ministers in question or the civil servants who had advised them.
The Secretary of the Department of Agriculture and Food indicated, following the reinstatement of those officers, that they were to be assigned to the offices of the Land Commission and that there were no duties which he could assign to them. In other words, salaries have been paid to employees of the Land Commission which will run to approximately £600,000 without any duties being assigned to them. They are effectively being paid to do nothing.
I ask the Committee of Public Accounts to examine this question in detail to ensure there will not be a recurrence in the future and that proper procedures are put in place to make sure money will not be wasted in such a scandalous way in the future. This is another indication of low standards in the public service which we are prepared to accept in this jurisdiction. In any other country the issue of resignation or redeployment of the people who made those decisions would be on the agenda, but this will not happen in the Republic of Ireland.
In discussing this issue, which is of rural interest, I would like to take this opportunity to call on the Government to establish immediately a rural development agency. The Minister for Agriculture and Food should co-ordinate the activities of a new land authority and Teagasc, under the Leader programme, and initiate meaningful rural enterprise and development. I congratulate the Taoiseach on ensuring that Deputy Hyland was put in charge of this matter and I urge him when he comes to reply to the debate to indicate that he will establish an agency who will bring together under one body all strands of rural enterprise and development and that he will co-ordinate the activities of the farm development service and Teagasc under the Leader programme to ensure that development proceeds in a co-ordinated way in rural areas.
There is a great misconception about the frustration and despair that is apparent in rural society today. People are clutching at straws and looking for some hope for the future. This is not just a farming problem; it affects chambers of commerce, trade unions and farm organisations who are concerned about the future prosperity and survival of rural economies. We are all aware that when the rural hinterland is prosperous our towns and villages benefit tremendously. When the farming community make money and are going well this eventually will lead to job creation in towns and villages. Unfortunately, I must say that the sheltered public servants of Kildare Street seem to be immune to the fact that rural society is breaking up beyond the Pale. Hundreds of people are turning up at seminars and conferences, in places such as Ballyfin College, and want to hear messages of hope. No amount of political rhetoric from the Government is acceptable and no amount of "Eurospeak" from Commissioner MacSharry will convince ordinary farmers and people in rural areas that increased Structural Funds and alternative enterprises in mushroom production, rabbit or deer farming will provide any lasting solution to the income crisis they face.
A development officer should be appointed in each rural county and individual people who have good ideas should be given every possible assistance to realise their job creation potential. Particularly as a result of the proposals put forward by Commissioner MacSharry, Teagasc have a unique expertise, with their advisory staff, to initiate development programmes throughout rural communities. These people are perhaps the most experienced and best equipped to take on this innovative role. Development officers should be in a position to visit every village and town to realise the potential of ideas and to offer leadership to rural communities to lift them out of their present difficulties.
If the Government fail to initiate a radical and innovative rural development programme vast tracts of rural areas will become depopulated. The idea that Europe can resolve our economic and social problems will become just a theoretical pipe dream of the decision makers. It is essential that Government, at local, national and international level, respond to people's sense of despair and hopelessness in order to avoid rampant poverty and alienation.
I am glad to have the opportunity to articulate some of the views I cherish in relation to the future development of land policy. I do not accept what the Minister of State said in his speech; indeed, I find it difficult to believe that he accepts it, because I have known him for a long time and know his commitment to agriculture and rural development. He is wrong in thinking that market forces alone will be sufficient to ensure that we continue to have a viable rural community.
I do not accept that there will not be a land agency during the term of office of the Minister of State, Deputy Hyland. I appeal to him to bring together all the potential of rural areas in one body to ensure that he heads a Department of rural enterprise which will show leadership and dynamism and bring hope to frustrated people who are looking for leadership at the moment.
There are a number of estates in the constituency of the Minister of State — and mine — which need to be divided and I know that there are plans in that regard in 1992. Very important work was carried out by Land Commission officers in respect of rearrangement of holdings and the elimination of fragmentation. In the village of Mooncoin in South Kilkenny there is a huge prevalence of fragmentation. The Minister of State, with the staff of the Land Commission — those who are left — should be able to say whether progress has been made in this area to ensure that we have a more ordered farming practice and a more viable farm holding system in that part of County Kilkenny.
Again, I wish the Minister of State every success in his new portfolio. The demise of the Land Commission following the important historic role they have performed over the years will, I hope, signal the commencement of something more dynamic, significant and concerted for rural areas in future.