I thank you, a Cheann Comhairle, for giving me the opportunity to raise this issue tonight. I wish to share my time with Deputy Connaughton.
Grant Payments.
Is that agreed? Agreed.
As a result of the over-subscription to the special beef premium by farmers which has led to a national quota overrun, beef farmers are set to take a severe cut of 20% on special beef premium and extensification payments this year. This overrun is as a direct result of the 47,000 premium rights lost by Ireland at the Luxembourg Farm Council meeting in June 2001. As a result of this and with the leaking of the document from the Fischler mid-term review proposals in early December which stated that 2002 would be a reference year for the calculation of the proposed single decoupling payment, there was a 37% increase in the number of applications for the special beef premium in December 2002 compared with December 2001.
It was agreed between the Minister and the social partner farm organisations to change the rules in the event of an overshoot in the national quota in 2002 by exempting farmers who applied on fewer than 50 animals from a reduction in payments should the national quota ceiling be exceeded. This agreement must be upheld. As this exempts 50% of animals, a 10% overshoot in the national quota effectively means a 20% reduction in applications on more than 50 animals to bring the total number under the ceiling.
The Minister for Agriculture and Food must find an immediate solution to prevent 10,000 livestock farmers from suffering a severe €20 million cut in income as a result of the overrun in the special beef premium. Livestock farmers face an average cut of €2,000 in each of their special beef premium applications. This will have a dramatic impact on many farmers, especially full-time farmers. In my constituency, 25% of farmers have left the land since the current parties in government took office almost six years ago.
This 20% cut equates to €46 per head which is over the profit made on the animal. Some 50% of the premium is gone at the time the animal is purchased in the first place. As a consequence, many farmers will be hit severely, especially finishers who will be put out on the road. Farmers need much more than 50 animals to be commercially viable.
Political intervention is required between the Minister for Agriculture and Food, Deputy Walsh, and the Commissioner. The Minister must find a solution to this special beef premium fiasco, especially given that it is a direct result of two issues outside the control of farmers: the Luxembourg beef premium quota cut and confusion caused by a leaked document from the Fischler proposals on what would be the base year. This leak alone caused a 70% overrun in the number of applications submitted in 2002. That was outside the control of farmers. Action needs to be taken now by the Minister for Agriculture and Food.
I thank Deputy Naughten for sharing his valuable time. When farmers read the eligibility regulations when applying for the special beef premium in 2002, there was nothing to suggest that there would be a 22% clawback on any premium. The most people expected was a 9% clawback and I understand that all farmers were agreeable to that. I do not need to tell the Minister of State, given the part of the world from where he comes, that if full-time farmers, especially winter fatteners, are surcharged to the tune of 22%, this will put them out of business.
I do not understand why the senior Minister is so slow in devising an answer to this. I will not go back over what Deputy Naughten said because he outlined the case very well. Surely there must be a system whereby the aggregate applications for even the two years 2002 and 2003 could counterbalance each other. Everyone knows that the number of animals applied for under the special beef premium this year will fall far short of last year. It is against that background that the Fischler announcement just before Christmas put the kibosh on the matter. The year 2002 was a year of record payments and every farmer knew that if he or she did not make the application he or she would lose out for a lifetime. No farmer could be blamed for doing that. I ask the Minister of State to convey to his senior Minister, with whose inaction on this matter many farmers are unhappy, that something can be done about it. This is not rocket science. I put it to the Minister of State that there is no beef farmer in this country who can take a 22% cut in his or her special beef premium. That is just not on. There are few beef farmers there already but this will drive them out altogether.
I thank the Deputies for their contributions to this Adjournment debate.
By way of background to the issue, I want to explain the context that has given rise to an overshoot on the special beef premium in 2002. Ireland's quota for special beef premiums was set at 1.077 million quota rights as part of the Agenda 2000 agreement and came into effect in 2000. As part of the decisions to bring the quota into effect, and to ensure that Irish farmers maximised their entitlements under the new arrangements, the Minister decided, after consultations with the main farming organisations, to apply the flexibility afforded by the regulations to target the application of the premiums rights in a manner best suited to Irish conditions. There was general acceptance of the need to tailor the quota in a manner that guaranteed the optimum take up of quota rights and consequently of premium entitlements.
Two decisions were taken in conformity with the views of the farm organisations. First, to increase the number of animals on which premiums could be applied from 90 to 180. The effect of this decision meant that farmers could apply on 360 animals in total, thereby facilitating the maximisation of the quota. Second, to apply an exemption for smaller farmers with up to 50 animals so that such farmers would not have their applications reduced, and their income for that matter, in the event that an overshoot on the national quota arose in any given year.
In the event there was no overshoot in 2000 nor indeed was there any overshoot in 2001. In fact the number of applications in each of these two years was about 3% below quota and therefore no reduction in premium entitlements for either of the two categories of producer arose.
However, in 2001 as part of a mini reform of the beef sector, which came about in an effort to restore market balance which had been adversely affected by the occurrence of BSE in mainland Europe, all member states had their quota rights reduced. In the case of Ireland the quota cut amounted to 49,305 quota rights. This resulted in a new national quota of 1.028 million. To a large extent this reduction was based on earlier years' utilisation of quota and the value of the decision to increase the headage limit to 180 ensured that Ireland's new quota arising from the mini reform was protected to the best possible extent. I point out that had we maintained the previous headage limit at 90, the level of utilisation in 2000 and 2001 would have been much lower and this would have resulted in a greater reduction in quota rights than was actually imposed. This new quota came into effect in 2002.
The Minister was conscious nonetheless that circumstances might arise that would lead to an overshoot in 2002, particularly when it became clear that live exports for the year had not resumed at reasonable levels and that suckler cow numbers had not declined as much as might have been expected in response to the various measures in Agenda 2000 designed to reduce production. It became evident as the year progressed that an overshoot was in sight and the Department actively addressed this issue in a variety of ways to highlight the potential risk and to promote moderation in the number of applications submitted. I wish to acknowledge the role of the farm organisations in this respect and also indeed of the advisory services. As the year came to a close we were confident that no overshoot would arise or that it would be contained at modest levels.
However, we had not anticipated, nor could it have been predicted, that draft Commission proposals for the mid-term review would be leaked before the end of 2002. Details were published in the Irish Farmers' Journal of 28 December 2002 and the aspect of particular relevance to beef producers was the designation of 2002 as one of the three reference years for the purposes of establishing entitlement to the single direct payment. This led to a flood of applications in the dying days of 2002 from farmers anxious to ensure they maximised their future income entitlements. These farmers would, in the normal course, have applied in respect of the animals in question, in 2003. However, the temptation to apply earlier led to the consequence that an overshoot of some 11% is expected. This equates to an excess of 114,871 animals over the quota and is close to the number of applications made for first-age and bull premiums in the last two days of the year. There is, therefore, incontrovertible evidence that the overshoot, though it may settle somewhat below 11%, was caused by the flood of applications following the leaked mid-term review proposals.
This matter has now been brought to the attention of the EU Commission and discussions have been held to explore measures to help alleviate the worst effects of the overshoot. Contacts at official level are ongoing with a view to finding an appropriate mechanism to minimise the impact on farmers. I appreciate what the Deputies have said in the debate so far. There is no easy solution to this problem and the fact is that, as matters stand, there is an absolute limit on the number of quota rights for 2002 and later years and any excess above that will be dealt with according to the rules set down, unless we can agree an alternative mechanism. I assure the Deputies we will continue our endeavours in this regard.