I propose to share my time with Deputy Molloy.
I move amendment No. 1:
To delete all words after "That Dáil Éireann" and substitute the following:
"commends the Minister for Agriculture, Food and Rural Development on his successful handling of the recent dispute between beef processors and meat factories and for his handling of agricultural issues generally".
I am pleased to respond to this debate. It would be better if more interest was shown in it. I commend the Deputies for their contributions which were sincerely made. There is no need to raise the decibel level or the level of insult in order to bring about a resolution of this question. I was particularly pleased to hear Deputy Penrose refer to the meat factory workers. Up to 5,000 workers in the beef industry and the general ancillary industries had no pay packets for the past two weeks and very few people commented on this. It is a pity that this dispute was politicised. I noted that a commentator in one of our national newspapers said that Fine Gael's involvement in the dispute was breathtakingly cynical. That is a pity. The dispute was serious and unprecendented but I am thankful that it is over. As Deputy Penrose said, some good may come out of it and I believe we are in a better position now than we were two weeks ago.
I thank my colleagues in Government for their wholehearted support for me, both in my handling of the recent dispute between the beef producers and processors and in my handling of agricultural issues generally. I reject the Opposition motion in total and in detail. It is irrelevant to the issues which lay at the heart of the events of the past few weeks and is even more irrelevant to the development of the beef industry.
While the decision by the meat processors to increase the meat inspection slaughter charge to farmers by 0.25p per lb might well have been an issue in the build up to the dispute the real and more fundamental cause was a general dissatisfaction on the part of farmers with the prices paid by the factories and a long-standing mistrust between both sides. Anybody with a basic understanding of the issues would accept that to be the case and this became even more clear as the dispute progressed.
I wish to address the considerable misunderstanding and ill-founded comments about the meat inspection service. EU legislation sets down minimum requirements in relation to veterinary supervision of slaughtering, cutting and processing operations. In the case of plants which slaughter cattle, a permanent presence is required in our factories. These are, however, the minimum requirements and our customers, particularly in third country markets impose additional requirements which we must comply with if we are to continue to do business with them. While our veterinary inspection system may seem relatively expensive, it must be seen in the context of our multi-billion pound industry. No other country is as dependent on export markets and for that reason our inspection system must be one which safeguards the reputation of the industry and ensures that our exports meet the demanding requirements of our customers. In all, we export beef to more than 60 countries worldwide. Comparisons are sometimes made with countries which have their own domestic market which we do not. We have to export nine out of every ten steers produced. Our veterinary inspection service has served the industry well, particularly in the three years since the BSE crisis of 1996. This can be seen from our success in retaining access to our major markets in spite of the upheaval which followed the BSE crisis. The fact that we have retained these markets and have been able, as we did recently in the case of Russia, to lift restrictions imposed on us is due to the in-depth audit and examination of our inspection systems. No fewer than 13 inspections have been carried out by third country customers since 1996. This is not to mention regular inspections by EU authorities and regular visits by major EU retail buyers. More and more, the retail buyers want to see our system on the ground. They visit our plants and our farms and it is important that we maintain the highest standards if we are to access and retain markets. The system has stood up to intense scrutiny.
The question of reorganising the beef inspection service prior to moving to full cost recovery has been raised. There have also been suggestions that there should be a greater degree of self regulation on the part of the meat industry. As far as reorganising the inspection service is concerned, my Department commissioned a report in 1995 from Ernst and Young. This report, which was submitted to my predecessor in 1996, included a series of recommendations which the report claimed would reduce significantly the cost of the service. The main recommendations were as follows: temporary veterinary inspectors should be replaced by auxiliaries; veterinary certificates should be replaced by commercial documents; and animal movements should be computerised in order to reduce the time spent by veterinary staff in tracing cattle.
The 1996 BSE crisis, however, effectively prevented the implementation of the first two recommendations. The permanent veterinary presence was a major factor in our success in retaining access to our major markets and most of our customers in the European Union insisted on veterinary certificates being retained. We are, of course, quite prepared to replace veterinary certificates by commercial documents wherever these are acceptable to the customers of our beef exporters. The third main recommendation – the computerisation of animal movement – has now been completed and its full implementation from 1 January is one of the factors behind the timing of the move to full recovery.
Any move in the direction of self-regulation would require changes to EU regulations and would have to be seen in the context of various scares in the meat industry in recent years. Nevertheless, I am in favour, in principle, of transferring some of the responsibility for meat inspection to the industry itself but any move towards self-regulation would have to be consistent with EU regulations, comply with the principles governing meat hygiene and be acceptable to our major customers abroad.
I wish to set out the facts on meat inspection fees. The Rainbow Coalition Government decided in March 1996 to recover the full cost of meat inspection services from the meat industry on an individual plant basis. The same Government decided, in November 1996 to postpone implementation of the decision until July 1997. It is ironic that the Opposition berates me for implementing a decision taken by them when in Government.
After various discussions and studies it was decided in the middle of last year to implement that decision from the beginning of this year. That decision was taken in the context of a rising price environment. I ask those who level this criticism to tell me when in the past two years it would have been a good time to implement this decision. However, implementation could not be delayed indefinitely and I am satisfied that following the implementation of computerisation of cattle movements in line with the recommendation of the Ernst and Young report it was opportune to implement the decision. There are numerous analogies in regard to paying for the cost of services provided by the State.
At the core of this dispute lay the mistrust between producers and processors. Unfortunately this is deep-seated and is fuelled on a regular basis by allegations of excessive profiteering by the meat factories on the basis of cartel type activities. My predecessor asked the Competition Authority in 1997 to examine these allegations but the authority has not yet been able to amass sufficient evidence to justify a prosecution. The investigation, however, is continuing. The investigation by the Competition Authority is in effect a criminal investigation and a high level of proof is required. My Department co-operated fully with the Competition Authority in its investigation and supplied it with all the information available, particularly in relation to prices paid by individual meat plants.
The Government has decided to establish an independent group to examine allegations of anti-competitive practices in the industry and the reasons for the large differential between producer and consumer prices. This group is chaired by the former Secretary General of the Department of Enterprise, Trade and Employment and includes two highly respected economists, Professor Séamus Sheehy of UCD and Mr. Colm McCarthy of DKM Consultants. The group has been asked to complete its report by the end of April. This is an effective and rapid way to deal with this matter and take it off the table once and for all.
The objective of the study is to establish the factual position on allegations about anti-competitive practices without having to meet the high levels of proof required by a criminal investigation. Should evidence of anti-competitive practices be uncovered, the Government will take whatever steps are necessary to terminate them. The examination of the differential between producer and consumer prices should also help to identify the reasons for the large differential and, more importantly, whether excessive margins are being made at any points in the food chain. The results of the study should facilitate a more rational debate on this matter.
The Government also took a decision last week to establish a market price transparency mechanism based on independent verification. While substantial progress had already been made in the monitoring committee which I set up last year to implement certain of the recommendations of the beef task force, this decision will expedite progress on this matter. I expect the price transparency mechanism based on independent verification will be finalised at an early date within the context of the monitoring committee. I want to lay to rest the question of price transparency.
Farming is cyclical. If prices are good, farmers are entitled to a good price and if they are bad, farmers are at least entitled to know what the market is returning. This system will provide that. I intend to publish what individual plants pay for each grade on a weekly basis so that this mistrust will be put out of the way and that a real partnership will develop. Great progress is being made in some areas, such as Deputy Penrose's, where a large differential is being paid for quality. We must move in that direction.
Farmers did not object to the decision on full cost recovery of the meat inspection service per se. What they did object to was the attempt by the meat processors to pass on to them in full the increased cost through an across the board flat charge. It was not my Department's understanding that the increased cost would be passed to farmers through this mechanism and it was made clear at an early stage in the dispute that the processors were not entitled to increase the levy on an across the board basis. That basis gave credence to the existence of a cartel in the sector. Following a meeting with my Department on 13 December, the meat processors reversed the increase in the slaughter charge on producers but this failed to defuse the situation. This confirms that the issue of the meat inspection charge was not central to the dispute and the misguided nature of the motion before the House.
While I am not defending the action of the meat processors, the increased slaughter charge imposed amounted to 25p per lb and was insignificant relative to the price increase of 7p per lb sought by the IFA. I accept the meat inspection charge is an important issue and its operational efficiency merits serious and rational consideration. We have agreed to set up a technical committee consisting of representatives of my Department to examine implementation details, including the definition of full recoverable cost and any efficiencies which can be identified in the system. It is a good credible service, which is recognised and accepted worldwide, but if we can reduce the costs, that will be done. The principle of full cost recovery has, however, been fully accepted by the IMA. In a nutshell, the levy was not central to the dispute, a strong and credible meat inspection service is vital for our industry, the decision on the levy was not hasty and the decision to pass the full cost to the farmer was taken by the factories.
As far as price is concerned, the IFA believed the meat factories enjoyed excessive profits last year, especially last autumn. In particular, it felt the benefits of the higher prices on export markets and the stronger dollar were not being passed on to producers. There was also a view among the farming community that the beef exporters were cutting each other's throats on third country markets in the knowledge that the weaker prices could be passed back to producers.
The meat processors, on the other hand, rejected the charge of excessive profiteering and insisted that cattle prices were determined on the basis of market realities. They did concede, however, that we are now operating in a rising price environment because of a better balance in the EU market, the elimination of intervention stocks and lower cattle supplies in Ireland and that prices were likely to move up over the coming months.
The non-price issues related mainly to trading relations between farmers and meat factories and involved, in essence, greater transparency in certain practices operated by the meat factories. I do not want to annoy Deputy Creed again but I must outline what was on the shopping list of the IFA. Price was the core issue. As far as I was concerned, getting rid of mistrust and building up partnership were the important matters but there were other issues.
The IFA was seeking to have cattle price quotations by meat plants made on a VAT exclusive basis and to have the insurance scheme for rejected cattle operated by meat plants subject to separate accounting to ensure farmers were not being overcharged. It also wanted some changes made to the clean cattle policy implemented at meat plants and to appoint liaison officers to improve customer relations between farmers and meat factories. This is necessarily a simplistic summary of the issues in dispute but it serves to demonstrate that the dispute was essentially between the IFA and meat processors, a fact acknowledged by anybody with an appreciation of the reality of the matter.
From an early stage I foresaw that the dispute, if prolonged, could inflict considerable damage on the industry. For this reason, I took a proactive role to bring it to an end as quickly as possible. The sequence of events demonstrate I did that. The IMA was met on Thursday, 13 January to seek to resolve the issue of the meat inspection charges. The agreement by my Department to the establishment of the technical committee, combined with the decision of the IMA on 14 January to reverse the increase in the slaughter charge to producers, effectively took the meat inspection fee issue out of the dispute. Unfortunately, since this was never a central issue, it did not succeed in unlocking the impasse.
Over the weekend of 15-16 January, I spent 12 hours mediating between the IFA and IMA. Substantial progress was made, especially with regard to transparency and building up relations between both sides. However, it was not possible to finalise all issues involved. It took more than one telephone call to get both sides together. This was a difficult dispute and court cases were taking place parallel to my efforts to mediate. The decision of the leading representatives of the IFA to resign from their positions following the judgment of the High Court on Monday, 17 January, delayed resumption of the discussions until Wednesday, 19 January.
The discussions went on through the night and into Thursday morning. In total, I chaired discussions lasting 27 hours, which surely indicates my commitment to ending the dispute. I am satisfied that the progress achieved during these negotiations, particularly on price and other issues, provided a valuable framework for the successful resolution of the dispute over the weekend. Without these discussions, it would not have been possible to conclude the local individual negotiations.
On price, the discussions succeeded in significantly bridging the gap between the price of 83p per lb on offer by the meat factories for O grade cattle and the 90p per lb sought by the IFA. While the meat factories' final indicative offer of 87.5p per lb fell short of the IFA's demand, it represented considerable progress and provided the basis for further negotiation on prices at local level between individual meat factories and their suppliers.
It is open to question whether the price should be fully resolved centrally. Given the nature of the trade and the different markets supplied, a dispute on price could be finally settled only on the basis of negotiations between the factories and suppliers at local level. What I set out to do, and I believe I succeeded, was to establish a framework within which local negotiations could take place. These negotiations have been successful and I am pleased that normal work has now resumed in the industry.
The Government took a strong interest, and an active role, in settling the dispute. The Government decided, at its meeting at Ballaghdereen on 19 January, to establish a market price transparency system based on independent verification. That is the key to the dispute. No farmer will believe what a factory will tell him about price and vice versa. Independent audit and verification are needed. That has been put in place. The independent committee to examine the cartel allegations was an important step towards the settlement of the dispute and took an important and thorny issue off the table.
Given that my primary objective in setting up the beef task force was to improve business relations between producers and processors, it is now essential that all the interests in the industry – farmers, the factories, workers – should put the recent dispute behind them. They need to have better customer relations and to work in partnership for the overall development of the industry. The report of the beef task force which represents the distilled wisdom of the entire industry is now more relevant than ever and must remain the blueprint for the future development of the industry. This task force had farmers and processors on it and was chaired by Mr. John Malone, the Secretary General of my Department.
Among the major issues dealt with by the task force which should be highlighted is the need to take full account of consumer requirements, especially concerning food safety. Also there is the need to refocus the marketing efforts of our industry on the high value EU retail sector. The blueprint for the future of the sector set out by the task force also addresses the hugely important issues of investment in processing and value-added products, and on farm efficiency. There is a need for partnership between processors and producers. The industry depends on an integrated two-way approach if it is to develop its full potential in the years ahead. If proof was needed, last week's events showed clearly how necessary this partnership is. There is also a need to encourage better breed selection in our cattle production as some 80% of cattle produced are not ideal for remunerative retail outlets in the EU. Funding to support this objective will be provided in the context of the national development plan.
I am conscious that the recent dispute could damage relations with our customers in the EU. In view of this, I met with the chairman and chief executive of An Bord Bia on Monday last to discuss the effects of recent developments in the beef sector on the international marketing of Irish beef and to take immediate action to address the situation. I asked An Bord Bia to devise in particular a strategy to address any damage which might have been done by the interruption in supply to the servicing of our extremely important EU customers. A dreadfully difficult situation arose following the BSE crisis in 1996. A great deal of credit must be given to farmers and the industry for regaining a foothold in markets and ensuring their product was placed on supermarket shelves once again. Last year, 416,000 head of cattle were exported live from Ireland and this is alongside meat industry exports. That situation in 1996 was not easy. If any other industry were hit by a crisis such as BSE, it would not have recovered so quickly. The beef industry did and it would be tragic if it were to lose ground now because of this dispute.
The debate has been worthwhile. We have had a difficult dispute which has been settled. Work remains to be done. The price transparency mechanism has been put in place. The "three wise men" committee has been put in place to dispense once and for all with allegations of a cartel. Liaison officers will be appointed by the IFA at local plant level. A great deal of good has resulted. This was an unprecedented dispute to which there was no magic wand solution. My role was to create a framework to enable the industry to return to business. I achieved that and I defend my role as Minister. I am prepared to be judged on my prompt and effective mediation in the recent dispute and on my record generally.
