Dáil Éireann debate -
Tuesday, 28 May 1996

Vol. 466 No. 1

Adjournment Debate. - Milk Quota Super Levy Liability.

Miss de Valera

I thank you, a Cheann Comhairle, for allowing me raise this matter of extreme importance to a number of farmers I represent in the Clare constituency, some 500 of whom face a crisis in regard to the milk super levy. A combination of factors has caused this problem. First, last year was one of the best ever for production, second, there was a severe shortage of temporary leasing and, third, there were difficulties regarding flexi-milk.

Some farmers face fines of between £1,000 and £6,000; one who contacted me last week was faced with a fine of £11,000. This is causing great distress and anxiety not only to farmers but their families, hitting them at the most expensive time of the year. We must remember that farmers must pay for feed and, if in financial difficulty, they cannot pay a silage contractor, in addition, a farmer must pay for fertiliser and if he is in financial difficulties he will not be able to pay his hardware shop bills.

This difficulty with regard to the milk levy will exacerbate nervousness on the part of banks, affecting not only farmers' spending capacity but it will have a negative, knock-on effect on the overall local economy.

These fines could put some dairy farmers in Clare out of business and may well drive some engaged in farming in the west from the land altogether. These fines amount to £0.5 million in west Clare alone, an already vulnerable area economically and, out of the £4 million super levy fines owed nationally, £1 million is due from County Clare. Many of those with a small milk quota are young farmers with a green certificate just embarking on farming who, like many others, will have small quotas and insufficient funds to buy or lease extra quotas.

What action must be taken in present circumstances? The Minister will have to examine the overall position in the short-term while simultaneously devising a long-term strategy. In the short-term, does the Minister envisage any role for the co-operatives in addressing these fines? How does he envisage a farmer being able to pay these fines? With regard to the long-term, a separate agency must be established to ensure that the Clare quota remains within the county and that leasing methods are examined urgently.

We must also receive answers to certain questions. Is it viable to purchase a quota? If someone wants to get out of dairying and wishes to sell his quota, will it have an asset value? Will a milk quota have an asset value after the year 2000? If a farmer does not have X number of cows after the year 2000, will it be possible to obtain a quota and, if not, will compensation be forthcoming and, if so, what form will it take?

The Minister must address the short-term problem facing so many of my constituents which is causing them and their families great heartache. Decisions need to be taken in an open manner. I hope the Minister will avail of the opportunity to examine the long-term problems of milk quotas and be up front with Members as regards proposed solutions.

Mr. Deenihan

I thank Deputy de Valera for raising this matter on the Adjournment and compliment her on her in-depth knowledge of the milk quota system, especially as operated in County Clare.

While the exact extent of the national super levy liability for the 1995-96 milk quota year is not yet finally established, there is little doubt that excess deliveries are in the region of 11 million gallons resulting in a levy bill of almost £15 million. The extent of this levy, in the main, is a reflection of two factors in particular, namely, the excellent summer for milk production in 1995-96 and the buoyant milk price. Of course it should be noted that the high milk price within the EU is a direct function of the milk quota system in the first place. Unlimited supply of milk in a very short time would result in prices that are considerably below the level enjoyed by producers today.

The levy liability will, of course, be spread over producers who exceeded their quota throughout the country and in the majority of co-operatives dairies. Many producers who face a penalty for 1995-96 may do so for the first time since the introduction of the milk quota system in 1984. Others will have incurred a larger penalty than in any of the previous milk quota years in which a super levy liability was incurred. The extent of this year's bill is put in context when we compare the likely outcome to Ireland's super levy history to date. The total amount of super levy previously paid by Ireland, since 1984, was approximately £27 million.

However, I must point out that the operation of the milk quota system in Ireland has always been very heavily biased in favour of smaller producers. As I have already said, the fact that many of these are situated in the west, north and north-east, means that these sensitive areas have benefited to the greatest extent from this policy.

Apart from various special reserve allocations which have been distributed over the years, the rules governing ongoing schemes such as temporary leasing, restructuring and the allocation of unused reference quantities — flexi-milk — ensure that smaller scale producers have first priority access to all quota becoming available for redistribution.

As a further encouragement to smaller producers, particularly those in sensitive areas, to expand their enterprise, two major new measures were introduced into the restructuring scheme in late 1994, namely, a subsidy towards the cost of purchasing additional quota by smaller scale producers and a restriction whereby quota surrendered from disadvantaged areas would be retained in those areas.

These measures have proved extremely successful in ensuring surrendered quota has been retained in these areas. They have also helped smaller scale producers to increase their production capacity. Under the 1994 and the 1995 subsidised restructuring schemes, my Department has paid, or is in the process of paying, subsidy on foot of over 7,500 applications. The most recent level of subsidy under this scheme was 75 pence per gallon.

The introduction of quota ring fencing into our national milk quota regulations in 1995 has also further helped to achieve the stated objective of retaining viable family farms in the disadvantaged areas by ensuring that quota cannot be transferred from these areas by way of land and quota transactions. The Minister of State at the Department of the Taoiseach was most influential in ensuring that decision as was Father Harry Bohan, whom I am sure the Deputy knows will.

While these measures are implemented with a view to improving the position of the smaller producers, they must, be realistically seen in their proper context — mechanisms for a biased operation of a quota system in favour of a certain category of producers. Notwithstanding these schemes, it should be emphasised, that the management of quota at farm level is the sole responsibility of each individual producer. Producers are regularly advised of this and of the national quota situation in monthly ministerial and departmental statements and encouraged to keep in close contact with their co-operatives and their advisers on how best to plan and manage their own quotas.

Returning to the liability for levy, I must stress that the actual amount of the liability for each individual co-op dairy will not be finalised for a number of weeks yet. Further flexi-milk will be available following the distribution of national flexi-milk. This allocation will obviously result in a reduction in the liability of individual farmers, in particular, smaller scale producers who remain the priority beneficiaries under the milk quota regime as operated in Ireland.

The Dáil adjourned at 9.10 p.m. until 10.30 a.m. on Wednesday, 29 May 1996.