Dáil Éireann debate -
Thursday, 26 Jun 2003

Vol. 569 No. 5

Common Agricultural Policy: Statements.

Minister for Agriculture and Food (Mr. Walsh)

I welcome this opportunity to inform the House of the outcome of the negotiations on the mid-term review of the Common Agricultural Policy which concluded at the meeting of the Council of Ministers in Luxembourg early this morning. As the House is aware, outline proposals for the mid-term review of Agenda 2000 were presented by the Commission in July 2002 while the detailed proposals were published in January 2003. The proposals comprised the most radical reform of the CAP since its foundation and have been the subject of much analysis and intense public debate here and in other member states. The Council of Ministers has debated the proposals at each of its meetings this year. My officials and I have had close ongoing consultations with all farming, food processing and other representative bodies as the negotiations have proceeded, mainly through consultative groups which I established for this purpose. Issues and concerns have been identified and have been well known for some time. I have also made my position on the proposals clear both at home and in the Council of Ministers.

From the outset, my objectives have been to safeguard the benefits to Irish agriculture and to rural communities of Agenda 2000 and to ensure the best possible level of support and protection for our production base into the future. The agreement reached this morning was the culmination of a long process and represented a meeting of minds that the time to conclude an agreement had been reached. Any objective examination of the outcome of the negotiations will acknowledge that I have been successful in achieving my objectives. By any standards, the terms of the balanced agreement concluded in the Council represent a successful outcome to the negotiations from Ireland's point of view. The agreement which was reached will reshape the Common Agricultural Policy and secure its future by making it more relevant to modern society. We have the opportunity now to exploit the position to our advantage. I will deal with the various issues involved in detail.

The proposal to decouple direct payments from production represented a fundamental change to the CAP and was the most contentious issue throughout the negotiations. The Council agreed to amend the proposal for full decoupling of direct payments to give member states a number of options to implement decoupling in a manner best suited to their requirements. Besides providing the opportunity to reduce the paperwork associated with direct payments, about which farmers have been extremely critical, the new arrangements provide new opportunities for Irish farmers to respond to market demands. The menu of options agreed includes provision to allow each member state to decouple fully all payments. It provides for other options in relation to cereals, beef and sheep meat which allow for a variety of partial decoupling arrangements. Some of the options include up to 100% coupling of the suckler cow premium, up to 100% coupling of the slaughter premium and up to 75% coupling of the special beef premium. The sheep premium and the supplementary ewe premium may now be either fully decoupled or fully coupled. Furthermore, payments up to 10% of a member state's direct payments may be allowed for the purpose of encouraging specific types of farming.

I am convinced the outcome of the negotiations represents a significant improvement on the original proposals and that it makes increased simplification possible. From the point of view of the forthcoming World Trade Organisation talks, the new arrangements on decoupling will enable a substantial proportion of direct payments, depending on the choices made by member states, to qualify as domestic supports with no trade-distorting effects or effects on production or, at most, minimal effects. This refers to the so-called "green box". Such supports will therefore be protected from challenge at the negotiations. I have made it absolutely clear that the outcome represents the bottom line in so far as the WTO negotiations are concerned and that I will not agree to a new WTO round which requires further reform of the Common Agricultural Policy.

I intend to consult with the social partners with a view to introducing the model best suited to Irish requirements to maximise efficiency, competitiveness and the protection of the rural economy. Moreover, I intend to keep the arrangements under close review, particularly in light of the facility under the agreement which provides for a review by the Commission of the operation of the new arrangements after two years with a view to dealing with its possible impact on structural reform and markets.

I am particularly satisfied with the outcome which I secured in relation to degressivity and modulation. The Commission's proposals represented a very serious threat to the level of direct payments to Ireland which are of critical importance to farm incomes of which they now account for 69%. The total amount involved is €1.3 billion. I managed to secure the removal of the proposed reduction of up to 13% in direct payments to meet future financing needs. This is the degressivity proposal. The removal of this automatic system of annual reductions in direct payments was a major achievement and the compromise agreed, which requires the Council to review from 2007 onwards the financial situation annually if budget deficits arise and to take the necessary action, represents a much more satisfactory approach.

In addition, the proposed rate of modulation has been reduced from 6% to 5%. My objective of retaining modulated funds within Ireland for rural development measures has also largely been achieved. Modulation will commence in 2005 at a rate of 3% and will increase by 1% each year to 5%. When the agreed modulated system is fully implemented, Ireland will retain over €34 million per annum of the €40 million which will be raised through modulation. The retention of the €5,000 franchise or exemption will ensure that modulation will not be applied to about half of Irish farmers. This is a major improvement on the original proposal whereby the combined effect of modulation and degressivity would have resulted in €464 million being siphoned off direct payments over the period 2006 to 2012.

On milk, I am delighted to inform the House that I have succeeded in having the original proposals for an overall 10% reduction beyond the level agreed in Agenda 2000 reduced to approximately 4%.

Mr. Hayes

What did Deputy Ned O'Keeffe say about that today?

Mr. Walsh

In addition, the original proposal provided for compensation for the intervention price reductions at the same level as applied in the Agenda 2000 agreement, or 56%. I managed to secure compensation of approximately 80% for the additional intervention price reduction of over 4% now agreed. That will be paid through a dairy cow premium.

Losses to the dairy sector from the net effect of the 4% intervention price reduction and the increase in the dairy cow premium amount to less than €14 million a year. However, the intervention price reduction will have effect only if product is sold to intervention. In other words, this represents a decrease in intervention, but if one is not tied to or dependent on it, there is no reason prices should be reduced by that or any amount. If product is sold where it should, on the market, there may not be any loss at all. In fact, depending on market prices, there could be substantial gains.

The Irish dairy industry must reform, rationalise and streamline its activities. To address this, I established the Prospectus Study some months ago and I am sure Deputies are familiar with the resulting report. It stated clearly that the Irish dairy industry must increase its product range. Selling to intervention is not the way to build a viable industry capable of remunerating its farmer suppliers adequately for its raw material.

Where we are and what we have to do can be illustrated by reference to a few statistics. In the last four years, Ireland has accounted for between 27% and 35% of EU butter intervention in-take, compared with our 8% share of production. The figures for skimmed milk powder are similar. Our reliance on commodity products is way out of line with, for example, Denmark and the Netherlands. Whole or skimmed milk powder contribute 50% of Irish total production of dairy products compared with 23% in Denmark and 15% in the Netherlands.

Notwithstanding the objective of reducing dependence on commodity products and on intervention purchases, the original proposal of the Commission to cut butter intervention intake to 30,000 tonnes a year would have been too disruptive in the short term. I was able to obtain an agreement against enormous opposition. In fact, no other member state, not even from among the ten new member states, was supportive of increased intervention. They knew, of course, that if a product is manufactured for intervention, it goes into storage and the taxpayer pays for that. It has to come out of intervention but while it is overhanging the market like a dark cloud, it depresses the market. Finally, it depresses prices further when it is released onto the market. That is not the way to build a viable industry for the future.

The Commission proposal was for a ceiling of 30,000 tonnes of butter. In my compromise proposal for a final agreement there is a ceiling for next year of 70,000 tonnes which reduces by 10,000 tonnes per year over the next five years. This gives a lead in period to the industry to wean itself away from dependence on intervention. The new dairy cow premium will not be decoupled until reform in the sector is completed thereby favouring active producers. Overall, the agreement is satisfactory given, in particular, that the quota regime has been extended. Irish farmers want the quota retained. There was also the option of retaining Agenda 2000 and losing the quota in 2008. Under the new arrangement, the quota is secure until 2015.

I argued successfully that the original proposal for a reduction of 5% in the intervention price for cereals was excessive and unnecessary in view of trends in world market prices. It was ultimately agreed to leave the intervention price for cereals unchanged with the partial retention of the monthly increments. I also secured the dropping of the original proposal for ten year obligatory non-rotational set aside, which would not have been suitable in the Irish situation. The new arrangements on set aside are more workable in the Irish situation and allow further set aside obligations as market needs arise.

From the outset of the negotiations I have been concerned to secure the best possible terms and conditions for young farmers.

Mr. Hayes

They will not be there.

Mr. Walsh

The strengthening of support available to young farmers by way of a special new incentive under the proposed rural development measures is another positive outcome. I was pleased that Macra na Feirme, in its comments on the outcome, was extremely positive.

Mr. Connaughton

It was about the only organisation that was positive.

Mr. Kehoe

It is not positive.

Mr. Walsh

The maximum support for young farmers undertaking investments within five years of setting up has been increased to 60% in less favoured areas and to 50% in other areas. Additional changes which I negotiated for young farmers include the more equitable calculation of single payment entitlements for young farmers who entered farming during the reference period, flexibility to create a national reserve and the possibility of allowing young farmers who inherit farms to also inherit any entitlements established by the retiring farmer. Other changes secured during the negotiations are as follows: the farm advisory system or farm audit will now be voluntary for all farmers, the national reserve may be used for certain early retirement cases and special payment entitlements for certain dairy and other farmers can be traded in the same way as single payment entitlements.

I firmly believe that the outcome of the negotiations means that the benefits of the Agenda 2000 agreement have been retained while the change in policy framework will ensure a more market orientated and sustainable agriculture and food industry. I had to look at the outcome as a total package and the balance within it. The new arrangements reposition the CAP in the modern world and, ultimately, in the longer term, will be seen as safeguarding its future. We are highly dependent on a strong and viable CAP and we are not serving our own interests if we bury our heads in the sand and ignore the external threats and challenges.

The options for decoupling direct payments will allow such payments to be made secure from challenge in the WTO. As a consequence, the contribution of direct payments to farm incomes and, therefore, to the rural economy will be safeguarded in a manner not heretofore achieved. I do not believe the level of criticism of the agreement is in any way justified. It is not helpful to the interests of Irish agriculture or our rural communities to criticise without justification a worthy agreement and, in the process, preach doom and gloom, which undermine the confidence of our farmers and particularly those young people contemplating entering farming.

We can look ahead with confidence and plan for the future in a stable policy environment. My priority now is to manage the transition from the old to the new regime so as to ensure a smooth transfer and enable Irish agriculture to exploit the new opportunities to the full.

Mr. Timmins

I wish to share time with Deputies Hayes and Crawford.

An Ceann Comhairle

Is that agreed? Agreed.

Mr. Timmins

All the criticism of this agreement has originated in the countryside. I thank the Minister for coming to the House at such short notice but I also wish to put on record that this debate, consisting of statements and questions, should not be taken as an indication that after 7.30 p.m. this issue should no longer be discussed in the House. Much analysis is needed to digest the detail and the likely impact the measures will have on the Irish farming sector.

I can understand that the Minister wishes to close the door on these proposals because, regardless of how one looks at them, it has been a bad day's work. Everybody remembers the former Taoiseach, Albert Reynolds, being carried home on the euphoria of many billions of pounds in Cohesion Funds.

Mr. Treacy

They came.

Mr. Timmins

Success was judged on the amount of additional funding or positive policy change that one achieved. On this occasion, however, the Minister came home with less than he had going out. No matter what measurement one uses this has to be adjudged a failure. To refer to it as a balanced outcome is simply not correct, because even within the failure some sectors have been more severely hurt than others.

Once again, the Minister's nemesis from east Cork has been hauled out by the Government doctors of spin to play the "good cop/bad cop" routine and, once again, our national broadcaster fell for this oft repeated crisis management tactic. The sentiments expressed by Deputy Ned O'Keeffe are correct. I only wish he had the courage of his articulated convictions to support the various motions put down in this House during the last year on agriculture. He talks the talk but he will not walk the walk.

Commissioner Fischler will argue that agricultural reform before the WTO meeting in Cancun in September was imperative to ensure that the Doha round can achieve fruition. He seamlessly threads the language of taxpayer, consumer, producer, market requirement, rural development and environmental protection – terms with which we all agree – into an inviting and mystic concoction which, as far as farmers in Ireland are concerned, will leave less money in their pockets. In recent times commentators have sought to sully the term "farm protectionism". The practice was there long before the advent of the Common Agricultural Policy and it was there for a good reason. Adam Smith in his book, "Wealth of Nations", written over 200 years ago, refers in detail to the various interventionist policies in the production of food in Europe.

The ultimate beneficiary of farm subsidies is the consumer. Farmers cannot be expected to produce for nothing and there has to be payment to ensure a sufficient and safe supply of food. Europe is not at the front of the world league in providing funding for agriculture and it imports more produce from third countries than the USA, Canada and the CAIRNS group put together. The Commissioner now has the deal he so longed for and let us hope that he loses no ground at the WTO. However, to sign off on any deal at 7 a.m., after an all night session, is no way to do business.

Ireland exports almost 90% of its produce. In relative terms the impact of this new deal will be felt to a greater extent in this country than in other member states. It is important to realise that these dramatic changes were originally supposed to be a review, not a reform. Following the agreement on Agenda 2000, the Minister established a working group which produced a document that became a blueprint for his Department, entitled "2010". Where does this stand now? Can we be sure that the new reforms will remain in place for the set period? The Commissioner says they should but we have heard that before.

When the original proposals first appeared in July 2002, there was no mention of any change in the dairy sector. One year later, however, we see that it has been struck a devastating blow. Is this a hidden cost of an enlargement which virtually all of us welcomed in view of the new opportunities it presented? Only time will tell the true story. Europe has been good to us but there must be honesty at all times. The main strength of the CAP has been that it was common to all members. The Commission's final paper of 26 June 2003 stated that "every country or Union has a right to an agricultural policy of its own, provided it is sustainable and avoids or limits trade distortion". I fear an advent of trade distortions in the EU and I would like an assurance from the Minister this will not be so. A nationalisation of the CAP is its dismantling and if this happens we will be at a serious disadvantage compared to our partners in the EU.

The Minister has outlined the detail of the document and a detailed analysis of this will be required in the days ahead. Over the last few months decoupling has been the main issue but the main losers in today's agreement are the dairy people. The drop in the price of milk in County Cork alone in 2001-02 was roughly equivalent to the loss of 1,450 jobs at the average industrial wage. A few months ago I spoke at a meeting in Mallow where much genuine cause for concern was raised. Dairy farmers have got one commitment from this deal and that is for reduced income. The number of quota holders declined by 31% between 1990 and 1999 – these were mainly quota holders with less than 20,000 gallons. Following these proposals the number of dairy farmers will fall by half from the current 27,000 over the next ten years.

The Minister will argue that the cut in dairying, taken on top of Agenda 2000 and averaged across butter and skim milk powder, is just over 4% but we must remember that Agenda 2000 has been scrapped so the real cut is over 19%. The loss in the price per gallon of milk is over 9 pence, not cents, and when fully implemented the loss to the dairy sector will be in the region of €115 million not €14 million as outlined by the Minister. Under the current policy a dairy farmer with a 40,000 gallon quota has an average income of €22,296, but under the new system his income will now fall to €15,443, a drop of €6,900. That is what faces a dairy farmer with a 40,000 gallon milk quota. I advise the Minister to take the boat home to west Cork and avoid what will be a very angry dairy country.

The proposed cut in cereals has been dropped but I note that Jacques Chirac is taking the credit for that. Any reduction in red tape is welcome and this may be the only positive aspect of this deal. I hope it will not be replaced with a plethora of cross-compliance measures as input costs for farmers have soared over the last few years. The Minister stated that he will sit down with the social partners over the next few weeks and decide on a form of decoupling. This is a most important decision.

To date there are many varied views on this. Many farmers want complete decoupling but others feel that some production measure has to be built in to ensure its sustainability. No matter what option is selected farm numbers will continue to decline. CSO figures published yesterday showed a drop in agricultural output volume of 8.1% for 2002 and when inflation is added to this it is clear that farm incomes are definitely falling. Government measures in the last year have also added to the burden. The Minister has to revisit these.

Jacques Delors said he would not sacrifice the French countryside on the altar of world trade. I fear that the deal the Government has struck has the potential to sacrifice our countryside. This is not just about economics, where we have clearly lost. It is also about the killing of our countryside. In light of today's events the Minister must seek a package at Cabinet to ensure the survival of our countryside. The best method of rural development is sustainable agriculture. This Government has failed to halt this slide and I have no confidence that it will do anything different in the future.

In conclusion, it is a pity that we are here today after the horse has bolted. For almost a year we have looked for a debate on this and we are getting it now. I hope that in the remaining week of this session the Minister, if required, will come back here to go through some of the finer detail of the reforms. I thank him for coming here today but we all know, and if he does not know now he will know by Monday or Tuesday, it is a bad deal.

Mr. Hayes

I join Deputy Timmins in thanking the Minister for coming here at such short notice to explain in detail how the Agenda 2000 talks worked out. Today will go down as the day when the Minister finally sold out on Irish agriculture. When farmers got out of bed this morning to go about their work they did not realise as they heard on the news and from Deputy Ned O'Keeffe how badly they had been sold out in Luxembourg. The dairy industry, which has been the backbone of Irish agriculture for many years, was sold out by this Government and by the negotiators in Luxembourg and when the dairy industry is sold out, the whole of agriculture and every section of the supporting community, co-ops in every town and village in the countryside, will be affected.

Deputies

Hear, hear.

Mr. Hayes

Thousands of jobs will be lost by the sell out in which the Minister took part and young farmers will no longer stay in the industry because they cannot. In recent years the numbers staying in agriculture were small but from now on young farmers will never take part in this industry because it has been sold out, and because of what happened in Luxembourg last night.

Twenty five years ago one could sell corn and get £80 or £85 a tonne. It made €70 a tonne last year and what will it make over the coming years? The beef industry too has been sold out. In every cattle market across the country over the next few weeks people will be so despondent about what happened that there will be a further drop in cattle prices. It is a sell out and a cop out. I am sorry for the backbenchers who have to sell this deal because people believe it is a sell out and that the Minister was weak in his negotiation.

An Ceann Comhairle

The Deputy has used half of the time remaining. There were six minutes and I understand that he is sharing with Deputy Crawford.

Mr. Hayes

One thing that I resent is that this country has never explained to the bureaucrats in Europe the importance of agriculture to this nation and our dependence on it.

Deputies

Hear, hear.

Mr. Crawford

The Minister has come into the House at very short notice today but this is the first time he has come in to discuss this issue. There have to be large question marks over that. The fact that the Minister has agreed to the re-nationalisation of agriculture and a major drop in dairy raises major questions about his ability. He has to consider his position. We are about to enter WTO talks and he has once again promised us that he will hold the line in those talks. He promised there would be no change in Agenda 2000 and now we have a drop in dairy farming and an opportunity for other countries to fund agriculture.

In the six years he has been Minister he has allowed the budget for agriculture to drop. I do not believe that the Minister will be able to deliver extra money at the Cabinet to relieve the problems that this deal has brought. Other countries will fund their farmers but we will not. Farmers are walking off the land in their hundreds. Six agricultural colleges have been closed in this Minister's time in office. He promised the opening of the Egyptian market for beef and live cattle. What has happened? Immediately before the election he got out a few tons, and last week he sent out another delegation to try to give the impression that he was active in that area again.

I said on the night of the Minister's appointment that he did a good job and that he is a nice fellow. He won a lot of plaudits for what he did during the foot and mouth outbreak but we all worked with him. He has got tired and fails to understand what the young farmers of this country want and need. When the small print emerges on the funds available to them it will be tied up in so much red tape that they will not be able to draw them down. A form for an ordinary farm building grant today is a nightmare. It can be filled only by a consultant. Will he change that? No. I do not believe there will be any move in that direction. There is only one thing for the Minister to do, and that is consider his position very seriously, for unless we get some new thinking in agriculture and some more backbone—

(Interruptions.)

An Ceann Comhairle

The Deputy's time has come to an end.

Mr. Crawford

That man stood up here and said that all the markets would be opened. They went to Iran, but they closed the market there. The Minister should not tell us what he will do.

An Ceann Comhairle

Deputy Crawford's time has concluded.

Mr. Crawford

The proof is there. Poultry farmers, mushroom farmers and pig farmers are all going out of business, and the Minister knows it.

(Interruptions.)

An Ceann Comhairle

I call Deputy Upton. Allow her to speak without interruption.

Dr. Upton

I too thank the Minister for coming to the House to allow an opportunity for debate on the outcome of the discussions. Much of the small print has yet to be dissected or absorbed, and at the moment it is only possible for us to respond to the broad thrust of the agreements reached this morning in Luxembourg. I ask at the outset that the Minister engage as soon as possible with the various farming organisations and social partners to discuss the impact of the reforms in detail. The different farming enterprises and the various sizes of farm holdings render it impossible to design a "one size fits all" response to different farming interests. The initial purpose of the Fischler proposals was to remove a subsidy-driven system which was taking up half the EU budget. EU subsidies still make up 60% of Irish farm incomes. The flexible arrangements on decoupling will allow a good degree of choice for farmers, but it is important that the different farming sectors are advised on the minutiae of the proposals to allow them to make informed choices.

It is a useful exercise to review the findings of a Eurobarometer poll held earlier this year. According to that poll, more than 60% of EU citizens see a shift to farm subsidies from production to directly supporting farmers and rural areas as positive and desirable. Those surveyed were strongly in favour of the farm policy objectives listed in the survey: to ensure that agricultural products are healthy and safe; to protect the environment; to protect medium and small farmers; to help farmers adapt their production to consumer expectations; and to make European agriculture more competitive on the world markets. I do not believe that anyone can disagree with any of those aspirations.

The key change arising from the Fischler proposals is that the majority of subsidies will be paid independently of the volume of production. Now it appears that there will be limited links between subsidy and production under defined conditions. The environment, food quality and animal welfare will be enhanced, and that is certainly to be welcomed. However, one of the concerns that has been expressed repeatedly by everyone who spoke here this evening is the level of bureaucracy historically associated with farm payments. Is the latest compromise likely to add to the bureaucracy? For example, there will presumably be different options for different farming sectors. Will that mean a lack of uniformity and therefore confusion and further bureaucracy?

I will refer specifically to the dairy sector. I understand why it has concerns about a significant drop in income. The Minister stated in his radio interview this morning that he saw a need for the industry to adapt and change. I would like him to expand on that concept and explain how the dairy farmers can be supported to accommodate that change. Milk production in Ireland is seasonal, and that cannot be altered. That seasonality precludes dairy farmers from certain options regarding alternative fresh dairy products throughout the year. What kind of supports does the Minister envisage to allow the development of alternative dairy products? Incidentally, both Mr. Fischler and Bord Bia have been calling for some time for Ireland to engage in the development of value-added products, and we seem to be lagging significantly behind European countries, as well as others such as Japan, in that area.

Everyone wants to see a vibrant rural economy and way of life, and up to now Brussels has underpinned that option for Ireland. It has provided the supports and market opportunities and allowed a rural way of life that would otherwise have been impossible. It is important now to secure farming where it is strong and viable. The diversification of rural employment options and retaining rural populations through resource-based development in other sectors, such as forestry, the marine and natural resources, must also be sustained and developed. Options such as tourism in rural Ireland must be enhanced and a quality product offered to visitors to this country. Rural towns must be supported with the labour supply and skills that will complement rural development. Small farmers should not be sacrificed to the larger enterprises. That is where new ideas must come forward. An acceptance of the need for off-farm work must be highlighted, and the Minister now has a responsibility to ensure that industry in small rural towns is given every support to ensure off-farm employment is enhanced and supported where necessary.

Linked to that is the need to ensure that can be accommodated by the local infrastructure. Industrial developments in small rural towns must be encouraged. It is now becoming just as important to the farmer as it is to the industrial worker that jobs in industry are protected. The area of research, development and education cannot be sacrificed, and for that reason I wish to express my concern once again at the cuts in funding for training, research and development, particularly in the area of food development, which were made earlier this year to the Teagasc budget. It is more important than ever, particularly when I refer back to the need to develop new products in the dairy industry, for example, that there is a strong research base to support that. That is not simply going to happen, and we must lead by making the best research facilities available to develop it.

Some of the issues I have mentioned, I acknowledge, would not have been part of the wider CAP reform discussions, but it is vitally important that they be recognised and debated nationally in tandem with the proposed reforms.

I would like to hear the views of the Minister on how the reforms will impact on the price of food. It seems that what has been offered today will bring no joy to the consumer regarding food prices, and it is important to note that farmers are also consumers of food. In all the press releases available today, the consumer scarcely merits a mention. This opportunity should not have been allowed to go by without ensuring that the consumer will also benefit financially from the deal struck. Perhaps, when the finer details are aired and debated, it will be possible to see a way forward to ensure the consumer is not ripped off in the prices that he or she pays for food here and that we might lose our rather invidious top-of-the-league place regarding European food prices. Enhanced quality and safety are most welcome, but the cost of food to the consumer must be addressed.

I represent an urban constituency. Food prices and jobs in the food industry are a primary concern for my constituents. However, it is also important to them and to me that the producers of the food and the instigators of the jobs, the farmers, also get a fair deal. The relevance of the reforms to developing countries has been disappointing. To say the very least, development has not been at the heart of the debate. Mr. Fischler stated today that we were saying goodbye to the old subsidy system, which significantly distorts international trade and harms developing countries. However, in reality we did not get rid of that system. It has been modified and reduced, and that is a step in the right direction, but it is misleading to suggest that the lot of developing countries will be significantly enhanced by the changes introduced today.

Arising from that last observation, I would like the Minister to give his views on the unity of purpose in the EU in approaching the World Trade Organisation talks in September. The negotiations in Europe were divisive. Is it safe to assume that unity will prevail in the talks and that any vested interests will be set aside? Perhaps the Minister might also let us know what specific involvement he will have in the WTO negotiations.

Mr. Boyle

I wish to share my time with Deputies Ferris and McHugh.

An Ceann Comhairle

Agreed.

Mr. Boyle

The Minister has had a difficult few days, and on behalf of my party I too appreciate this early opportunity to debate the outcome of talks that have been keenly awaited and are of crucial importance not only to the economy of the country but to the future of rural life. In the press release issued by the Minister's Department, it was stated that he had secured concessions to ensure that Ireland's objectives had been satisfied in crucial negotiations. It struck me as a press release that could have been issued regarding any number of previous meetings for farm negotiations at European Council level. It has been yet another series of negotiations about retrenchment and fighting a rearguard action, trying to avoid what has seemingly been the inevitable direction of European Union farm policy in recent years. The type of fudge has been agreed that has dogged agriculture and failed many who wish to see a viable industry based on innovation and quality. An opportunity has been lost.

The Minister stated that his prime objective was to ensure decisions had been ring-fenced and that further decisions could not be made at the World Trade Organisation talks in Cancun. This is an unfortunate response. There exists a climate, even within the farming community in Ireland, where different farm organisations are looking at different approaches and are debating within and between their organisations as to how things can and should be done differently in agriculture.

The Minister has presided over the evolution of agriculture where many farmers are more concerned with drawing ink than with driving cattle. They are more concerned with filling forms than with ploughing furrows. Many who have been engaged in agriculture did not get involved in agricultural life for those reasons and do not want to remain in agricultural life for those reasons. The net effect has been that 2,000 leave farming each year.

Existing prices are on absolute levels and in real terms are much less than ten years ago. This is not a record of which one can be proud. Those on this side should constantly remind the Minister of the failings of the policies being pursued.

The language of agriculture has been debased. We are now talking about decoupling, digression, modulation and the basics of agriculture. It is a culture that has been debased. We are thoroughly enthralled to the needs of agri-business and the needs of individual farmers and family farms have taken a low priority in Government policy and how it has influenced EU policy. That has had knock-on effects in terms of consumer confidence. My party and I are confident that confidence can be restored because there is within the Irish agricultural community the ability to produce food of high quality at costs that are easily affordable and can compete with the best in the world. Unfortunately the Common Agricultural Policy as organised does not allow that to happen. Ultimately the Minister's stand on the World Trade Organisation talks, while perhaps done in the best interests of Ireland and Irish farmers in the short term, will have a knock-on effect as to how Ireland is perceived in the wider world community. That will affect our ability to export agricultural produce.

The effect of the Common Agricultural Policy is that a subsidy in the EU region of $2 per day is paid per head of cattle. That is twice what 1 billion people on the planet have to exist on. If agricultural subsidies and our ability to create a viable agricultural system which interacts, competes and provides quality food are put in those terms we need to ask serious questions. The reality is that the Minister could have taken chances. We should have taken the leap into the unknown. Agricultural policy should not have been linked solely with production but with income maintenance, innovation and active rural development policies. The opposite is the case and 2,000 farmers per year are leaving the land.

Mr. Treacy

Not true. Zero rated—

An Ceann Comhairle

Deputy Boyle, without interruption.

Mr. Boyle

Now that the Minister of State has started to nod his head and has introduced the green bogey man, I would say to him that every time that statement has come from that side of the House it has made us laugh with derision. We have not been in Government. The bogey man has been sitting in the Department for the past six years, has been practising the policies and driving 2,000 farmers off farm holdings each year during the past six years. The bogey man has made farm prices static in absolute and real terms. That is the tragedy of the traditional, conservative, short-sighted, blinkered approached the Minister has followed in yet another series of farm negotiations. Irish farming will be the worse for it and Irish agriculture will take a long time to recover from this approach.

Mr. Ferris

The proposals, as agreed, present considerable opportunities for Irish farmers if adapted to best advantage. To the extent that the Minister has been able to ensure this is the case he must be commended. The reforms contain proposals which can be made to work for the benefit of Irish farmers. Sinn Féin has said this from the time the original reform proposals were published in July 2002. Almost alone among Irish political parties and some farming organisations we had advocated a creative engagement with the process in order to secure the best possible deal for Irish farmers.

We have long been critical of the Common Agricultural Policy. It was clear that in its present form small to medium size farmers would continue to struggle with the continual loss of tens of thousands from that sector. A stark indication of this fact was that of 146,300 farmers in the State in 1998, only 43,300 were considered viable. Faced with the choice of a continuation of this process under the status quo or seizing the opportunity to bring about a reform that will guarantee a certain level of security and prosperity for small to medium size farms there was only one option. It is unfortunate that others chose to adopt a completely negative approach and this contributed to the lack of input into the final agreement.

We have to look at how the Common Agricultural Policy has served us. Who represented the tens of thousands of Irish farmers who have left the land? The family farm and the countryside has been decimated. We have argued that we had to approach this review in a positive and constructive way in order to do the best for those most in need, the small to medium size family farm. I am not worried about ranchers, those with hundreds of acres of land and those in the €100,000 income threshold in the farming community.

A Deputy

Where are they?

Mr. Ferris

Sinn Féin is concerned, and the Government and this House should be concerned, about those who are struggling to make ends meet and those who are struggling with bureaucracy trying to fill out forms and being penalised if they make a slight mistake. That is why we came out in favour of decoupling so that payments could go directly into the farmer's pocket. We advocated that when it was not popular in this House. We stood alone on it and make no apologies for doing so because the small family farmer has been neglected by those they chose to represent them. The small farmer has been decimated and little has been done to eradicate the cause of what is happening.

I commend the Minister for having the courage to come in and put the proposal before the House. Sinn Féin supports parts of it. It is easy to be negative and critical all the time but what does it do for those who are struggling to survive and maintain a way of life. We have to look at the positive aspects and offer something constructive to the debate, otherwise we are not doing a service to those who elected us or those we purport to represent, the family farm, and the small family farm.

In regard to modulation, parts of it are difficult. The position in regard to the dairy farmer is worrying and something will have to be done in a collective and responsible way to address the needs. Equally there are difficulties and problems for the young farmer entering the industry and we must try to find a way of ensuring they will have a livelihood that will sustain them and their families into the future. If we go down the road of attacking each other and trying to expose each other here in regard to the negotiations – I have said this in the House previously and at every IFA, ICMSA and ICSA meeting – collectively we are not singing from the same hymn sheet. That was a difficulty. We have to find a mechanism here where we represent those most in mind. That is the reason I give a qualified welcome to many parts of what has been negotiated. There are difficulties in other parts of it. I will be critical when it is constructive to be critical but not for the sake of making noise and seeking a headline in the newspaper because it is far more important to remember the ordinary people whom we represent. We represent the family farm and that is more important than seeking a headline in tomorrow's newspaper.

Mr. McHugh

I welcome the Minister back from the CAP reform talks in Luxembourg. This welcome is to reassure the Minister lest he got a different impression if he was listening to one of his Munster party colleagues on the "News at One" today.

Tonight's discussion takes place after the deed has been done. The CAP reforms have been agreed and this House has no power to change in any way the elements of the package agreed. This exercise therefore is, in a sense, a post mortem. Normally in carrying out a post mortem one has a body. The disadvantage this evening is that we do not have that body, nor do we have the fine details necessary to enable a definitive assessment to be made.

One could take one element of the package and deem the whole deal a failure. One could, for political purposes, take a negative view in order to play to the gallery and bask in whatever benefits accrue from that stance. However, the package has many elements and facets and a balanced judgment needs to be made.

There is no doubt that the dairy sector will suffer most from this deal. It is estimated that dairy farmers could experience a cut of one third in their incomes. This is disastrous for them. If any other sector of society was faced with such a drop in income there would be a revolution.

One of the elements of the reforms which has most engaged people's attention throughout the negotiations has been the decoupling of direct payments from production. I welcome the outcome of the talks in regard to this issue. Some may say the outcome was a fudge or a cop-out but I disagree. In any EU negotiations it is a good outcome if there is agreement to allow individual member states tailor policies to their own requirements, as is the case on this issue. The various options agreed include provision for fully decoupling all payments. It also allows for a number of other options in regard to partial decoupling for cereals, beef and sheep meat.

We need to simplify the present set up. We are now being allowed the opportunity to engage in constructive discussions and internal negotiations which will hopefully lead to an improved lot for Irish farmers. In my discussions with farmers in the west I have detected a fair degree of support for full decoupling. I therefore welcome this opportunity whereby other elements of disagreement are removed from the agenda in order that the debate can focus on decoupling and what is best for Irish farmers.

It was important to have this mid-term review of the Common Agricultural Policy concluded before the WTO talks take place. With this agreement now in place the EU can enter those talks with a clear agenda, focused on securing a more favourable outcome for Europe.

These discussions on the CAP reform agreement are taking place too early. It would have been more sensible to have deferred such a discussion until next week when more details would be available and when the impact of those details on the entire farming community could be fully assessed. I am not looking forward to the next few weeks where some Government backbench Deputies will no doubt do political somersaults in regard to this deal when the pressure comes from some sectors.

Mr. Connaughton

They have done some already.

Mr. McHugh

Deputy Ned O'Keeffe set the ball rolling today. I say to those backbenchers that it was their Minister and Government who did the deal. It is time for them to decide which side of the House they are on.

Mr. Timmins

Can the Minister tell me when he will make the final decision on decoupling? Can he guarantee that there will be no reform of the CAP at the WTO talks? When reform is up and running fully, will the €34 million that will come into modulation come back to the Department of Agriculture and Food or will it go to the colleague of the Minister of State, Deputy Treacy, to spend on his clients in Galway tarring roads or whatever? Finally, the Minister's colleague, Deputy Ned O'Keeffe – I do not like referring to him too often because I notice that when we had a vote he voted with the Government but said something else on the public airwaves – said that the dairy measures would have a devastating impact on the Munster area where he said 40% of the milk is processed. I know that 25% of dairy cows in the country are from Cork and perhaps they produce 40% of the milk. Will the Minister tell me if his former ministerial colleague is right?

Mr. Treacy

An Gleann Órga.

Mr. Walsh

I thank the Deputies who have contributed to this discussion. When I arrived back to Dublin this morning I got word that I was wanted in the Dáil to make statements and answer questions and I am happy to do that.

It is a good suggestion that in a few weeks' time, when the entire document is studied and evaluated and we have received some clarifications still awaited from the Commission – there are some technical matters still to be ironed out – we could have a fuller debate. The committees of the House will continue during the summer although the House will adjourn next week. I and my two colleagues, Ministers of State, Deputies Aylward and Treacy, will be available to attend one of those committees for a fuller debate.

I welcome the constructive contributions made by a number of Deputies in regard to this important matter. Decoupling, or the new arrangement for supporting agriculture, comes into effect at any time from 1 January 2005. If any member state wants to wait till 2007 to give it more transition time it is free to do so.

Mr. Timmins

When will the Minister make a decision on what option we will take?

Mr. Walsh

I have publicly stated a number of times, especially in the last few weeks, that it is my intention, when people have had time to study the outcome, when the technical details regarding ceilings, retention times and the various menus there for decoupling and partial decoupling and the full impact of that is studied properly – I expect that will be in three or four weeks' time – I will sit down with the social partners, the farming pillar, and we will decide on a road map for the future development of agriculture.

In regard to the WTO, Commissioner Fischler is of course only one part of the negotiations. Commissioner Lamy, because it is a trade round, will represent the Commission. Commissioner Fischler has given an absolute commitment that the reason for the reform of the Common Agricultural Policy now is to ensure we do not have to reform it again after the WTO talks. In other words, we are not going to pay twice for the reform of the Common Agricultural Policy. There will not be any further dilution of the CAP in the WTO round.

We have got a good outcome to modulation. There is a need to invest on-farm and that is where the money will go. It is in the regulation that the money will go for various enterprises which are environmentally friendly and which produce high quality safe food.

The dairy industry is extremely important and is the backbone of the agriculture industry. However, 50% of the milk produced in Ireland, which is converted into butter and powder, ends up in intervention. At the moment, 30% of the entire butter mountain has been created by Ireland. It is a cost to the taxpayer and export subsidies have to be put in place to finally dump this butter in some part of the world. As Deputy Upton said, there is no regard for developing countries in the use of export subsidies to get rid of it. There are 200,000 tonnes of butter in intervention at the moment. Commissioner Fischler and Europe are entitled to be concerned about the creation of a further butter mountain. It is incumbent on the processing industry to broaden the profile of its products. We are members of a community of 400 million consumers. That will be increased by 109 million from 1 January. That is over 500 million consumers—

Mr. Connaughton

They are all mad for butter.

Mr. Walsh

—and yet, some people suggest we rely on the prop of converting milk into products, storing them in intervention at a cost and disposing of them to some unfortunate country which is trying to develop its own industry. This is not a reliable basis for the future of the dairy industry.

Dr. Upton

I agree with the Minister's last point regarding intervention. There are serious objections to producing a product and storing it, just for the sake of doing so, and drawing a subsidy on its account. It is all very well to state that we have access to intervention storage but does the Minister have any suggestions or ideas as to how we can change that system to stop these products being produced for intervention? What kinds of supports can be put in place for the dairy farming community to allow it to develop alternative products? We must produce value-added and different kinds of products.

There has been little commentary in regard to consumer prices. Consumers reasonably expect that there should be some account of the fact that we pay inordinately high prices for many of our food products. Does the Minister see any way in which those prices will be reduced or any other benefit to the consumer?

Mr. Walsh

In regard to weaning the dairy industry away from intervention, I commissioned the Prospectus study last year which produced its findings a couple of months ago. I have met with virtually all the co-ops in the last few weeks to tell them that they need to share facilities and engage in far more research and development. The Danish dairy industry invests more than twice as much in research and development as the Irish industry and it has a far better profile of products. Denmark is further away from the UK market, and yet it has no difficulties in that regard. Denmark objected to my call for greater input of butter into intervention, despite the fact that its industry is similar to ours. The Danish climate and industry structure is more difficult than Ireland's because the cows are indoors for several months of the year. Even so, the Danes are not screaming for a dependence on intervention.

There is a structure in west Cork, which might be taken as an example, where four co-ops use one central processing facility – Carberry Milk Products. That company is doing a tremendous job in making a whole range of products, some as exotic as Ború vodka.

Mr. Hayes

We could do with a swig of that today.

Mr. Walsh

I could do with a swig of it myself.

As well as that, Newmarket and Kanturk co-op in north Cork concentrate milk whey and send it to Carberry Milk Products. They share the facility. Another company called Shannonside is in casein production. It is in a central location and could be examined for opportunities to share facilities. There is no point in a multiplicity of dairies producing the same product in different locations. There must be a sharing of operations and a sharing of research and development. In Killeshandra some 30 years ago, John O' Neill was making UHT milk in jigger packs that ended up on every airline in the world and a whole range of products developed afterwards. It is some time since I read about or visited a plant that had a new process or product. We must get away from the industry's dependence on the intervention culture. Enterprise Ireland has a range of grant aids, particularly for research and development, available to the industry.

It is always difficult to ensure that any support system is ultimately passed on to the consumer by way of lower prices. However, I hope that can be the case as a result of this package. An ordinary farmer at present must have suckler cows or special beef in order to draw down grants. That notwithstanding they are substantial grants. For example, in the special beef, the farmer gets two €150, two €80 on extensification and another €80 in slaughter premium. That amounts to €540 before the farmer goes to the factory. He or she will now be able to get these grants in one single farm payment and can decide what he or she is going to do. For example, the farmer could decide to specialise in high quality Angus beef or Belgian blue beef for a particular market. That is the farmer's only outlet, therefore, he or she must have regard to what the consumer wants in terms of quality, food safety and animal welfare. Some farmers are now being paid €1.10 for high quality beef by local butchers who specialise in high quality. There is no other way to go and we must continue in that direction.

Mr. Hayes

Maybe we could have done that if the Minister had stopped Argentinean and Brazilian beef coming into the country.

Mr. J. Brady

I wish to compliment the Minister on a job well done. We are lucky to be in the capable hands of Deputy Walsh, negotiating on behalf of Irish farming.

Mr. Kehoe

The Deputy better not say that in the committee.

Mr. J. Brady

What are the options now facing farming with regard to decoupling? What is the level of compensation in regard to milk production? What improvement was achieved by the 30,000 tonne limit on intervention butter? What concessions did the Minister negotiate for young farmers? In that regard, I am glad to read that Macra na Feirme has welcomed the negotiations.

Mr. Kehoe

It has not.

Mr. J. Brady

When will the new arrangements for livestock come into effect? Can sheep payments now be fully decoupled and what are the effects of the deal on the €1 billion annual livestock payments?

Mr. Walsh

I have already stated that the form of coupling or decoupling will be decided in consultation with the farming pillar of the social partners. We have myriad choices – we can have full decoupling of all payments across the board or alternatively we can have vertical decoupling. For example, we could have the ewe, special beef and suckler premia fully decoupled or have partial decoupling for some of them, with others fully decoupled. There is a range and flexibility. Therefore, it will be a matter of achieving consensus between the Department and the social partners as to the best way forward.

The position in regard to milk is that there is a 4% reduction in intervention support. There is no reason why that should be reflected in the price of milk to farmers. It will only be so if the processors are dependent on intervention. If they are not, there is no reason why that should represent a loss. At any rate, it is made up with compensation to the tune of 81%, by way of a new dairy cow premium.

I have already explained the position in regard to butter. However, the final outcome is that next year the 30,000 tonne limit is up to 70,000 tonnes, the following year, 60,000 tonnes and so on, down to 30,000 over a five year period. This is to give the Irish dairy processing industry a lead-in time in order to get away from its over-dependence on intervention. The ewe premium can also be fully decoupled.

In regard to the general payments in support of agriculture, the Agenda 2000 payments are secured. They are doubly secured because they will avoid any challenge in the WTO because they are going from the blue box into the green box, which is extremely important.

Mr. Connaughton

Good.

Mr. Walsh

The value in direct payments is €1.3 billion. This will result in an average 69% of farmers' incomes in direct payments. It is a matter for farmers then to make a profit. If one includes REPS and the farm retirement scheme, those payments go up to €1.6 billion per annum. For REPS alone, over the next three years, there is €1 billion available. It is also a tremendous scheme ensuring good farm practice and caring for the rural environment. I believe there is a degree of security and certainty, including the security of milk quotas until 2015, in the outcome of this package. This is a good package for Irish agriculture.

Mr. McHugh

Does the Minister for Agriculture and Food agree with the statement issued by the ICMSA that this agreement will lead to a reduction of one third in dairy farm incomes?

Mr. Connaughton

Of all the Ministers for Agriculture coming back from the most important negotiations, I have never seen a worse—

An Ceann Comhairle

The Deputy should take a lesson from his colleague and confine himself to a question.

Mr. Hayes

He is only a new Deputy.

Mr. Connaughton

There is a haziness about what is going on here. Nobody knows what is happening. Out of this fog, a ghost has come to haunt every Irish dairy farmer.

An Ceann Comhairle

The Deputy is denying his colleagues an opportunity to ask a question.

Mr. Connaughton

For the first time I can remember, dairy farmers will sell milk ex-farm, without the compensation, for 75 cent. I want the Minister for Agriculture and Food to stand up and deny that is right. The price today is 92 cent to 96 cent. As regards the compensation, there will be a loss of 80% – it accounts for only 9 cent to 10 cent. The farmers will lose at least 9 cent to 10 cent, but they will sell the milk at 75 cent. I want the Minister to comment on that.

If one takes an 80,000 gallon farmer, he will lose €7,200 net on the package the Minister brought back this morning. To go down that road is to break the backs of the dairy farmers of Ireland.

The Minister talked about the overall intervention cut from 70,000 tonnes to 30,000 tonnes, but what he did not say is that it stands at 150,000 tonnes as we speak. That is where the huge cut is. Calf prices will fall and milk quota will be devalued, even though the Minister states it will be there until 2015 If we take this package in its totality, the Minister has nailed the dairy farmers of Ireland—

An Ceann Comhairle

I draw the Deputy's attention to the fact that three of his party colleagues are offering to speak. The Deputy is not asking questions but making a contribution.

Mr. Treacy

He is whingeing.

Mr. Connaughton

In so far as decoupling is concerned, where is the saving if one partially decouples the special ewe premium? The inspectors will have to come out and inspect the sheep anyway whether one is getting the full or half premium. Has the Minister made up his mind about the red tape? He has not belled the cat. Ordinary farmers will see that in these reforms they are being sold out. Why the Minister did not stand up and walk out last night during the negotiations, I will never know. It was done years ago, with much better effect. The Minister for Agriculture and Food has let us down.

Mr. Kirk

The Minister for Agriculture and Food has negotiated well in very difficult circumstances. Those of us long enough in the House will remember the time when there was talk about food security at Community level. We are not talking about food security anymore but about a completely different policy within the CAP, taking account of the changes within the European and the wider global market.

One issue that is relevant to my constituency is that of force majeure. Sheep farmers in the Cooley peninsula who were badly hit during the foot and mouth disease outbreak are clearly in a force majeure situation. How will individual farmers who experienced disease problems in the reference years be catered for? The reference years that are mentioned are 2000, 2001 and 2002. Is there any flexibility in that, particularly having regard to force majeure considerations?

Apart from the research and development provisions in terms of Enterprise Ireland, most people accept that new product development is vital for the future viability of the dairy industry. Indeed it is much more relevant than much of what is being said here. If we can develop on that area, it will assure the future for the dairy sector.

How tradeable will production rights be? Clearly, in the dairy sector, there is a dairy cow premium and it is important to bear in mind that it is based on the milk quota rather than the number of animals retained on the farm. My interpretation – I am subject to correction – is that this will be paid in a number of stages, to peak at a significant figure of 16 cent or 17 cent per gallon. At what stage will that kick in and will it, in turn, be decoupled? Will a minimum stocking density be required for the operation of the new regime, having regard to the new test rates that are going to kick in now? This gives individual farmers the opportunity and the freedom to farm.

Can we anticipate that this package will stand the tests of the WTO negotiations? In that context, there is always the worry that there could be a dilution of what is involved in the package. As the package will be introduced on a phased basis in particular areas, what is the timescale for this?

I congratulate the Minister for Agriculture and Food for his work. We do not fully appreciate the difficult circumstances in which he was negotiating. He did well in the circumstances.

Mr. Walsh

Deputy McHugh referred to the ICMSA statement on farm incomes. The incomes of dairy farmers are a matter for the dairy industry, particularly on the processing and marketing side. Dairy farmers have improved their operations substantially over the past decade with exceptional milking parlours. It is a pity that the processing and marketing side has not developed in parallel with this. Dairy farmers are entitled to the best return. The cuts that have been put in place in Agenda 2000 and the 4% cuts in this package are intervention cuts. They have nothing to do with the market. The sooner the industry gets closer to the market and gets a better return, the better. It is a large market in Europe with a population of 400 million, and in the new Europe it will be 509 million. Anyone can stroll down to a supermarket in Clondalkin or Ballinasloe and find dairy products from as far away as New Zealand.

Mr. Connaughton

There will be more after the negotiations last night.

Mr. Walsh

There are opportunities for our dairy industry in terms of supply. I have not heard what the ICMSA favours. It is easy to get out of bed in the morning and criticise a document before it is even run off the presses, but it is more difficult to say what one wants from these negotiations.

Deputy Connaughton spoke about the milk industry and decoupling. If there is full decoupling for the sheep industry, that will remove the red tape. There will be an annual single payment. If there is horizontal decoupling, with a ratio of 75:25 or 50:50, all the red tape will be retained.

Mr. Connaughton

Exactly, so what?

Mr. Walsh

I will repeat for the third time that in a few weeks' time I will meet the farming pillar of the social partners and we will decide by consensus what route we will take. It is very easy to say we will opt for full decoupling across the board. When I hired FAPRI Ireland, the independent economic study group, to create models for full and partial decoupling, its findings suggested that there would be a 16% reduction in the suckler cow herd and a 5% reduction in sheep numbers. We need to retain a production base because if it is lost at any stage in a certain product area it is not possible to recommence production immediately four or five years later. Detailed studies and comprehensive discussions will take place with the social partners to ensure we get it right.

Regarding the return from milk, even though reasonable progress has been made, more is needed. Let us make a comparison with Denmark. Average butter fat in Denmark is 4.3% whereas it is 3.75% in Ireland. The average protein in Denmark is 3.6% and is 3.25% in Ireland. There is no reason we cannot improve on that, although we are a long way from where we were ten to 15 years ago.

I remember when the MacSharry reforms were introduced. Some people described him as Cromwell and burned effigies of him and so on. The same people reacted similarly to Agenda 2000. Almost every development that has taken place since we joined the EEC and Europe has been criticised by these people.

Mr. Connaughton

Farmers have left the land. They are gone.

Mr. Hayes

Those people were right.

An Ceann Comhairle

The Minister, without interruption.

Mr. Walsh

I remember when milk quota was introduced they said it would devastate rural areas.

Mr. Connaughton

The Minister said that when it was introduced.

Mr. Walsh

If there was an attempt to remove the quota now, there would be a different reaction.

Mr. Connaughton

When the Minister was in Opposition, he never stopped complaining.

Mr. M. Smith

Fine Gael Members sunk themselves for years in doom and gloom.

Mr. Connaughton

So did Fianna Fáil.

Mr. Treacy

The party of darkness.

Mr. Connaughton

Fianna Fáil did not know if it was a good or a bad thing.

A Deputy

If it is not negative, it does not suit.

Mr. Connaughton

The Minister for Defence should tell the people of Tipperary what price they will get for a gallon of milk.

Mr. Walsh

What model do you stand for over there?

An Ceann Comhairle

I would prefer if the Minister addressed his remarks through the Chair.

Mr. Walsh

Deputy Kirk raised a number of pertinent matters. Regarding force majeure, people in the Cooley Mountains who had to destock are entitled to consideration as a result. We have elicited important changes and modifications in regard to the reference years, 2000, 2001 and 2002. For example, if a young person inherited a farm in 2001 or 2002, the original proposals provided that the amount of direct support that farm received was divided by three over the three years. Now it is either divided by two if it is inherited for two years or not at all it is only for one year. That is very important.

There are other technical matters, such as a farmer who has leased his farm in the context of the farm retirement scheme and is mid-way through. If a younger family member is waiting to take over the farm, he or she can inherit it and the single farm payment that goes with it. In some cases there is no family member to take over the farm and the question then is who qualifies for the premia rights. That is one of the technical matters that must be ironed out with the legal services in the European Union. The person farming would feel he or she would be entitled to the premium while the retiring farmer would say he had built the farm up over a lifetime and would be entitled to the premium. We do not want litigation like the Mulder case with milk quotas. We want to get it right.

The issue of production rights, to which Deputy Kirk referred, is one of the other technical matters which are with the legal services. It will take a few weeks to decide how they will be traded. The dairy cow premium will remain coupled up to 2008 and there will be a review at that stage. I know all the farming organisations wanted it because they wanted support for active producers and farmers and that active farmers would be entitled to the dairy cow premium. There would be no requirement for stocking density in the context of full decoupling.

An Ceann Comhairle

We have exceeded the 30 minutes but five minutes were saved in the statements so I will take brief questions and the number taken will depend on the brevity of Deputies.

Mr. Kehoe

The Minister has definitely spent time with the Taoiseach because he is as good as him at putting a spin on events.

The only way younger people will enter farming is if incomes increase. Will the Minister say how he would explain to a younger farmer that income has increased in farming when it has decreased in every facet of farming from beef to sheep to dairying?

If Macra na Feirme has described the talks as tough times ahead for younger farmers, how could it accept them in that event?

Mr. Callanan

Can the special top-up premium for sheep be paid if there is full decoupling? The other question is—

An Ceann Comhairle

The Deputy should ask one question because I would prefer to let everyone have a fair chance.

Mr. Deenihan

Will the Minister confirm or deny the statement by the IFA that the real cut for the dairy farmer will be 25% and also the statement by the ICMSA that the cut in the gallon of milk will be nine old pence? Will the Minister consult the groups that are not in the partnership process?

An Ceann Comhairle

Deputies should ask one question to allow colleagues ask questions.

Mr. Ellis

Will the Minister inform us of the rights of those who enter after 2002, that is, those who enter this year or next year?

Mr. P. Breen

Did the meat companies put any pressure on the Minister against full decoupling? They would obviously be the major losers if full decoupling were introduced.

Mr. Walsh

I neglected to respond to Deputy Johnny Brady who had some pertinent questions, and far be it from me to snub he who has made such an important contribution to the House and is doing an outstanding job as chairman of the national resources committee.

(Interruptions).

An Ceann Comhairle

Allow the Minister, without interruption.

Mr. Walsh

Deputy Johnny Brady asked about cereals, and an effective job was done in this regard. It is all very well for Members to give the credit to Jacques Chirac—

Mr. Timmins

He is claiming it.

Mr. Connaughton

Send him a Christmas card.

Mr. Walsh

—but the fact is that, since we joined the European Community, we have made it our business to stay close to French leaders, especially Jacques Chirac and the French Minister for agriculture, because French farming is similar to Irish farming. We only have three votes out of 87 on the Council of Ministers and we need alliances. The alliance and partnership we have with France is extremely important to us. There will be no cut in the price of cereals and that is a good outcome.

Regarding young farmers, we have negotiated a number of important concessions related to hereditary and trading rights, the take-over of farms, investment at a higher rate for younger farmers and a range of other areas. These concessions have been much appreciated.

Deputy Johnny Brady also asked how soon sheep decoupling can be implemented. The answer is from 1 January 2005, but the decision on the best starting date will depend on the outcome of the negotiations with the social partners. The Deputy also asked about the terms of decoupling and the options facing farmers. There is a range of options and that was one of the successes of the outcome of the package. It took us away from complete dependence on full decoupling and gave us a range of opportunities.

Deputy Kehoe talked about farm incomes. I was interested earlier to hear a not very large farmer say that his income would fall from €22,000 to €15,000. I thought the average income was already €15,000 but I am glad to know it is €22,000.

Mr. Timmins

On 40,000 gallons.

Mr. Deenihan

The Minister should look at the proportions.

Mr. Walsh

Deputy Callanan raised the important matter of the rural world premium. There was an insistence in the original negotiations to have the rural world premium coupled. The idea was decouple the rest of the premium and for the last seven pounds every single sheep had to be kept and produced. We got rid of that and it is now either full decoupling or full coupling for the entire sheep subsidy.

Deputy Deenihan asked about groups that are not in partnership. During the negotiations in Luxembourg in the last three weeks, a number of bodies attended the margins of the talks that are not in partnership and I had regular meetings with them and I will continue to do that. The ICSA is not a member of the social partnership pillar but it attended all of the consultations and briefings in Luxembourg and issued a complimentary statement on the outcome of the talks.

Mr. Deenihan

Will the Minister answer the question about the drop in price? I asked the Minister a specific question. John Dillon of the IFA stated today that dairy incomes will fall by 25% because of these changes.

Mr. Treacy

He was not even at the briefing.

Mr. Deenihan

Will the Minister confirm or deny that? The ICMSA has also said the gallon of milk will go down 9 cent. Will he confirm or deny that statement? These are clear and specific questions.

Mr. Walsh

For the umpteenth time the drop in income in relation to the dairy sector, or any other sector, will be dependent on the dairy processors' dependence on intervention. The drop is only in intervention and not from the market place and the sooner those processors rely on the market place and on consumers the better.

Mr. Deenihan

The Minister has confirmed the 25% reduction.

Mr. Walsh

There is a co-operative plc in the Deputy's area and it is not today or yesterday that it got away from intervention and fair play to its members for taking that decision. If they had listened to the Deputy they would never have done that. That co-operative is absolutely outstanding and it is an awful pity that more co-operatives did not take a leaf out of its book.

Mr. Deenihan

That is totally unfair and an outlandish thing to say.

Mr. Walsh

In relation to Deputy Ellis's question, we are waiting for the legal services to give us a lead on inheritance.

Mr. Connaughton

It was a disaster.

(Interruptions).

Acting Chairman (Mr. Kirk)

Disorder is breaking out. That completes the debate.