Priority Questions

Common Agricultural Policy Reform

Éamon Ó Cuív

Question:

49. Deputy Éamon Ó Cuív asked the Minister for Agriculture, Food and the Marine the position regarding Common Agricultural Policy reform; and if he will make a statement on the matter. [39744/13]

Political agreement between the three European institutions on reform of the Common Agricultural Policy was reached under the Irish Presidency in June, with final details expected to be agreed with the European Parliament, hopefully this afternoon. There is a final trialogue between the Parliament, the Commission and the Council which finalised its position yesterday in terms of those negotiations.

The reform addresses three broad themes. First, there is a greater emphasis on sustainability and on further strengthening the environmental credentials of the CAP, through the greening of direct payments and the requirement to support agri-environmental measures in rural development programmes. Second, generational renewal is given a much greater focus, with new and enhanced support for young farmers under both pillars of the CAP and third, there is a continuing move towards greater market orientation, through the phasing out of production quotas for key products and the use of market support measures as a safety net in the event of severe market disturbance. In addition, considerable flexibility is granted to member states under the reform to pursue targeted policies under both Pillar 1 and Pillar 2 that are suited to their individual circumstances and agricultural production systems. Most importantly from an Irish perspective, this extends to the way in which direct payments are to be redistributed between farmers, which will allow us to achieve the twin objectives of making the direct payments system fairer for those currently on low payments, while not undermining the efforts of those on higher payments to develop their farming enterprises.

It is up to member states now to get on with the implementation of the reform. I launched a consultation process with all the relevant stakeholders and other interested parties in July and by the closing date of last Friday, 20 September, 37 responses had been received. I and my Department will consider these submissions over the coming weeks and I intend to formulate and publicise the final shape of the new direct payments system. In my answer here it states "towards the end of 2013" but I hope to do it considerably earlier than that.

In regard to Pillar 2, preparatory work for the next Rural Development Programme 2014-2020 is already well under way. An initial stakeholder consultation process was launched in 2012 and written submissions were received from over 80 stakeholders. A second consultation was held in July where stakeholders attended a full-day workshop. Based on the outcome of these processes, the drafting of a new programme will be advanced in my Department before the end of the year.

Like the Minister, I also wish those involved in today's discussions well. In the interests of farmers I hope they come to a conclusion.

The Deputy's questions are all very relevant. I, too, hope we can conclude the discussions and finalisation of the agreement with the European Parliament today. What is currently being finalised relates to multi-annual financial framework decisions by Heads of States in terms of issues such as transfer between pillars and a number of other issues around capping, in which I know Deputy Martin Ferris also has an interest. I hope we can reach final agreement with the Parliament on those issues which remain outstanding.

On the co-financing issue, about which I have been asked repeatedly, there are a number of different co-financing rates available to Ireland because the Commission is trying to encourage member states to ensure they spend money on particular issues. For example, a 75% co-funding rate will be applied to environmental schemes and a co-funding rate of 53% will be applied to other schemes. It is no surprise that I would expect the Department of Public Expenditure and Reform to ensure that, first, all of the money is drawn down and, second, that we maximise the highest level of co-funding available for Ireland. We need to take this into account, of course, but my first priority is to ensure we are spending as much money as we can in rural Ireland on the schemes that can give us the biggest bang for our buck. It is too early for me to say we will have a 50:50 co-funding of all expenditure. However, I can assure the Deputy we will be ensuring all of the EU money available under Pillar 2 will be fully drawn down and we will co-fund to the extent necessary to ensure that happens and, one hopes, in the years ahead, go well beyond that, as previous Governments did when they added significant top-ups from the Exchequer to rural development programmes.

On the forestry issue, it is unlikely we will include forestry expenditure in the rural development programmes. However, I do not wish to rule anything out until such time as our approach has been finalised following the public consultation.

I welcome the firm commitment that all EU funds will be drawn down. Obviously, we want to get as much money as possible, but we also need to look at what schemes will provide the best bang for farmers' buck. That is a matter we can debate in more detail some other day in another forum. It should be recognised that the Minister has stated clearly that there will be full drawdown of EU funds.

In regard to Pillar 1, can the Minister confirm that he does not propose to go down the route of regionalisation or the reduction coefficient? Will he outline the objective basis on which he favours a variable greening as opposed to paying everybody the same amount for the same work in terms of ecology?

I do not propose to make any absolutes today in terms of commitments because I believe that would make a farce of the consultation process. Deputies will be aware of my views on most of these issues, which may or may not change following conclusion of the consultation process. I would be very slow to introduce a reduction coefficient to parts of the country. The reason Ireland fought hard for acceptance of the redistribution model is because we want to try to keep the entire country under the same payment model rather than take money from people because they farm in mountainous areas and so on. I am not inclined to do that unless there are very persuasive arguments to do so. The same reasoning would apply to breaking Ireland up into different regions and giving different payments per hectare within different regions. I believe that would cause a great deal of division within Irish agriculture and I do not want to do that unless I have to. I think that is unlikely to happen but one cannot rule anything out.

Stocking Densities

My Department has used stocking density as one measure of agricultural productivity. While stocking density does not represent all the elements of agricultural productivity, it is a tangible and precise measurement of activity for which data from my Department are readily available. I am aware that Deputies have received these data.

Previous analysis by my Department has found that, using average results per payment category, farmers on payment rates per hectare above the national average have roughly double the stocking density of those below the average. However, they also show that the stocking density of farms on the very highest payment rates - for example, more than €500 per hectare - is not significantly higher than the stocking density of farms just above the national average. This data suggests that while some level of convergence is justified, a complete flattening of direct payments, as originally proposed by the European Commission, is not justified.

Following the successful completion of the negotiations on reform of the Common Agricultural Policy under the Irish Presidency, I launched a consultation process with all relevant stakeholders to ascertain their views on the most appropriate application of the direct payment regulation in light of Ireland’s unique agricultural profile and circumstances. As I indicated, the final date for submissions on the consultative paper was 20 September. The process of analysing all submissions will now begin in conjunction with the ongoing modelling of the various options that are available to Ireland.

There is an ongoing and divisive discussion on this issue. Farmers who are gaining from the new measures wish to maximise their gains, while farmers who are losing want to minimise their losses. I have been transparent in this matter and have travelled around the country selling the new model, under which payments will be redistributed gradually over time. Farmers in receipt of the highest payment will be asked to meet the cost of increases for those in receipt of the lowest payments. We added to this mechanism in the final agreement by guaranteeing a minimum payment of at least 60% of the average.

We have also included an option of introducing a maximum payment per hectare, an issue in which the Deputy has shown an interest, having asked questions on it previously. While I support this option in principle, I do not wish to give an absolute commitment until the consultation process has been completed. By the time the current Common Agricultural Policy has run its course, we will have seen a dramatic redistribution of supports among farmers. This will be done in a fair and gradual manner. While the most productive farmers will, in general, continue to have the highest payments, the gap between the highest and lowest payments will be much narrower.

The statistics on stocking density show significant differences in respect of those in receipt of higher payments and those on lower payments. For instance, farmers with an average single farm payment of €282 per hectare have an average stocking density of 1.47, whereas those in receipt of an average payment of €1,180 per hectare have an average stocking density of 1.92. Slightly more than 200 farmers receive a single farm payment in excess of €100,000 per annum and the amount paid to this group is €33 million per annum. A further 1,800 farmers receive a single farm payment of between €50,000 and €100,000. The small number of recipients on higher payments receive more in total than the 52,000 farmers who receive payments of less than €5,000 per annum.

The straight answer is "yes" that it is unfair and we will change it. However, I am not sure we will change it to the extent that the Deputy would like. We must work within the parameters of the rules that have been agreed under the CAP. At yesterday's meeting the Council of Ministers made a final decision on the capping of payments. Some very large member states have taken a very strong stand against any mandatory capping of payments. States such as Ireland have argued that there should be capping. So we will be able to introduce a voluntary cap for payments over €150,000 - not under that - if that is agreed with the Parliament today. We could also introduce a per-hectare cap on payment, which we may well decide to do. I am very much open to considering that as I have said previously. Should farmers receive payments of more than, for example, €700 when there are also farmers on a minimum payment of €145 to €150 per hectare? Those are the kinds of questions we can tease out in the consultation process, but I am looking at the issue.

Currently, at the start of this process, there are farmers on €40 per hectare and farmers on €1,400 per hectare. At the end of this process the likely scenario is that no one will be on less than €145 to €150 per hectare and very few, if any, will be on more than €700 per hectare. There is a significant squeezing towards the average while also recognising that the most productive farmers in the country need the supports to allow them to grow and expand.

I welcome what the Minister said about bringing the payments closer together and trying to look after weaker farmers to allow them to be viable and survive. Is capping the payment at €150,000 written stone or can it be negotiated? Do individual states have the flexibility to introduce their own cap on payments? It is not right for anyone to get more than €100,000. We should reduce that figure. It does not make any sense that 200 farmers get more than €100,000, totalling €33 million. We should have the flexibility to reduce the CAP payment ourselves. I welcome that the Minister is raising the minimum and reducing the overall payment.

It is important for people to know what is possible and what is not possible. We have previously discussed putting a ceiling on payments of €100,000. In principle I agreed with that and I am on the record as having said that. We now have an agreement with other Ministers. Some countries, in particular Germany and the UK, wanted no capping at all and have only agreed to a 5% degressive payment over €150,000, which represents very limited capping. We have also agreed that on a voluntary basis member states may have a degressive payment of up to 100% - in other words no payment above €150,000. However, there is no provision allowing us to introduce a cap under that. The reason is that we have a Common Market in which big farmers are competing with big farmers in other parts of Europe in the same marketplace. There was a view that we need to try to maintain a level playing field on direct payments available for farmers. I would not have had an issue if the agreement at ministerial level was for a cap at €100,000. However, that is not the position - the position is €150,000. We will decide whether we choose to reduce payments above that figure or to cap payments at that figure, as we will decide everything else at the end of the consultation process.

Common Agricultural Policy Negotiations

The European Council on 7 and 8 February agreed the multiannual financial framework for the period 2014 to 2020. The overall EU budget was cut by about 7% compared with the Commission’s original proposals, and by 3.5% compared with the current MFF for the period 2007 to 2013.

The issue of how money is to be redistributed is a burning one for farmers, now more than ever. From speaking to farmers in my constituency, it is clear they need certainty on their payments. We all know it is crucial that the Minister delivers an outcome that protects the interests of farmers and their families. While I understand there is agreement in principle, can the Minister clarify whether Irish farmers will get the minimum of €150 per hectare under the reforms or at least 60% of the national average payment? Will he confirm that no farmer will lose more than 28% of the current payment?

They are easy questions to answer. First of all, there will be a minimum payment. One of the big negotiating issues with the Commission during the six months of our Presidency was around this mandatory minimum payment; it is not voluntary. In any country, whatever the average payment, if that country is not going to go to a flat rate payment model, as the Commission would like, and if that country is going to introduce the convergence model that Ireland designed and for which it managed to get support, under that model the country must ensure no farmer getting a direct payment gets less than 60% of the average payment in that country. That is a welcome development. If that figure had been too high, I believe it would have posed significant problems in Ireland and I reckon 60% is approximately the right figure. This means that the 60% figure will be somewhere between €145 and €150 per hectare.

The second question Deputy Halligan asked was whether no farmer would lose more than 28% of his payment. There is a voluntary measure that can be introduced in Ireland or anywhere else whereby a country can limit the losses to any one farmer of 30% of his direct payment. In my view, we should not use that in Ireland. The reason is that if a farmer is on €1,500 per hectare at the moment and we limited what he could lose to 30%, he would still be on €1,000 per hectare, which is indefensible. The result of having that limit would mean that people who are closer to the average payment would have to lose more to compensate. The 30% figure under the convergence model does not make much sense in terms of fairness.

I thank the Minister but I must call Deputy Halligan.

Consequently, while I do not propose to use that, the Department will implement the mandatory minimum payment.

I thank the Minister and acknowledge it is good to have a minimum payment to bring all farmers up to an acceptable level of direct supports. However, my information is that while approximately 60,000 farmers will gain under the reforms, another 50,000 farmers will lose out. The Minister might confirm this, although it may be difficult for him to provide an immediate answer, and should clarify these figures or indicate by how much the aforementioned 50,000 farmers will lose out.

As I stated, this has been the topic for many debates nationwide that I have attended, as have other Deputies. However, there are more winners than losers in this regard because of the way in which money is distributed at present. As farmers who get less than the average payment get a smaller payment than do those who are above the average, there are more farmers in the former category and therefore, there are more winners than losers in the context of people seeing an increase in their single farm payment. However, the important issue is the level of losses being incurred by those who are above the average to bring up everyone else who is under the average. These will be significantly less than most people thought possible under these negotiations. One will see an average loss of somewhere between 8% and 12% for most farmers over a seven-year period, which is not dramatic.

I thank the Minister.

Unless one is in receipt of an extremely high payment, one will not see significant losses in any single year. Moreover, even if one is in receipt of a very high payment, it still is staged over a seven-year period. However, the majority of farmers are in or around the average, that is, somewhere between €200 and €400 per hectare. These farmers will not see a significant redistribution one way or the other.

Agriculture Schemes Administration

I am glad this question has been tabled because it gives me the opportunity to clarify an issue about which I suspect many farmers will ask me tomorrow at the ploughing championships. The Deputy will be fully aware of the importance of payments made under the single payment scheme, the disadvantaged areas scheme and other direct payment schemes to the annual income of Irish farmers. My Department is bound, under EU regulations, to maintain the accuracy of the land parcel identification system, LPIS, which underpins the processing of applications under these schemes, as well as the rural environment protection scheme, REPS, and the agri-environment options scheme, AEOS.

At the start of each year, my Department issues colour maps of all land parcels declared by farmers in the previous year together with a covering letter. In that letter farmers are reminded to examine each map carefully and to identify and exclude from their application all ineligible features such as buildings, farmyards, scrub, roadways, forests, lakes and so on included in the land parcels. There is, therefore, an onus on all farmers to ensure the area of land declared by them as eligible for payment under the direct payment system is accurate. They also are given the means to do so by making available the ortho-photos to them on an annual basis. These requirements are also made clear in the terms and conditions of the schemes, which accompany the preprinted application form issued to all farmers at the commencement of the application period each year. In view of the size and structure of farm enterprises in Ireland, farmers are fully aware of all of the non-eligible areas of their holdings. In addition to any changes submitted by farmers and to ensure the integrity of the LPIS, my Department continuously reviews the eligibility of lands claimed by farmers for the single payment scheme and other direct payment schemes.

This is the important part. As part of the clearance process, a bilateral meeting was held on 25 July between the European Commission clearance auditors and my Department. At that meeting it was agreed that to avoid a significant correction - which means fines or disallowances - this Department would be obliged first, to review its entire LPIS database and deal with ineligible features, in other words to re-digitise, second, to establish any overpayments due to the over-declaration and seek refund from the farmers involved since 2009 and third, to prepare a report of its findings to the Commission by 15 December.

Additional information not given on the floor of the House

This is a mammoth task but my Department is making efforts to ensure it will be completed in a manner that satisfies the Commission. The Department is currently reviewing all land parcels claimed in respect of the 2009 to 2012 direct payment scheme years. This effectively means a review of all 950,000 land parcels for each of four scheme years. As a result of this phase of this review, any payments made to farmers in respect of claimed areas, which were found to be ineligible, must be reimbursed.

If farmers are not satisfied with the determination made in their case, my intention is to introduce a robust and comprehensive appeal process. In the first instance, applicants will be entitled to have their case reviewed by submitting their appeal on the form provided by my Department. If they are not satisfied with the outcome of the review, they can appeal their case to the independent land eligibility appeals committee. This committee will consist of an independent chairman and appeal officers from the agriculture appeals office.

I thank the Minister for his reply, but it will not satisfy many farmers. Most farmers thought they had passed the test for 2008, 2009 and 2010, that the Department had double-checked their homework for those years and that if they adhered to what the Department had agreed in the digitisation and examination of the maps, following all the letters they had received in the last few years, that the maps were in order. Elderly farmers, in particular, thought they were in order because their homework had been passed. They then received a letter in July stating that they might have been overpaid from 2008 to 2010. No map accompanied the letter. I have a copy of the letter with me if the Minister wishes to see it. The letter did not say on what basis the overpayment was being calculated. Having written to the Department and eventually getting the maps, the Department wrote back to the farmers to say it was not the years 2008 to 2010 but the years 2009 to 2012. The Minister should bear in mind that in a case where one has a farm of 10 hectares, 0.3 of a hectare is the 3% limit of error one is allowed. It is not a huge amount of land. Is it legally possible for the State to carry this burden rather than the farmer?

No, it is not. I will explain how and why this happened. Every year we look at maps that have been used for applications and assess approximately one-quarter of them. Where there are inaccuracies and land that is not eligible for payment, we ask farmers to correct them. That is normal practice. However, the Commission is not satisfied with the way this has been done and has asked us to look at every land parcel in the country, with no exception. We now have a far more accurate mapping system using a new technology which is, essentially, satellite imagery. The maps farmers have been using until about a year ago were made from photographs taken by airplanes flying at high altitude. The satellite technology is much more accurate. The maps are crystal clear now, as opposed to being a little fuzzy in terms of detail. As a result of that, we now have no excuses regarding the accuracy of the amount of land that is eligible and ineligible. This is public money that is being spent. We cannot stand over a situation where public money has been spent on paying farmers for land that was not eligible for payments, so we must ask for it back.

As to whether the Commission is serious about this, if we do not do it, significant fines will be imposed on us. The Commission has fined the UK €58 million, Poland €30 million, Denmark €11.45 million, Spain €132 million, Italy €111 million, Greece €104 million and France €62 million for this reason. I can understand why farmers might well be irritated by being asked to make repayments on land on which they should not have received payments, but they would be far more irritated if I had to take money away from their schemes to pay the type of fines that other European countries have had to pay because they were not compliant. For that reason, we will be compliant.

In the Minister's first reply he used the words "disallowance" and "fine" interchangeably.

There a difference between a disallowance of a recoupment and a fine. If the Minister cannot provide the details now, will he forward to me the exact basis on which this country could be either disallowed or fined if we decided to correct the maps but not to collect the money back over five years and impose huge penalties year after year, because the Department had passed the payments and people thought they were in order?

It would be highly irresponsible to encourage farmers to take the course the Deputy has just described because it would be a waste of their time and resources were they to do so. The legalities relating to this matter are very clear. The rules are outlined to farmers when they complete the relevant forms each year.

Let us see what the Ombudsman thinks.

If a farmer makes an application in respect of land that is not eligible, the onus is on him or her to correct the position. We are following up on this matter and we have the technology to do so much more accurately than was the case in the past. We are required by the Commission to do it in respect of every land parcel throughout the country rather than simply proceeding, as was previously the case, on the basis of a random sample. I advise farmers not to listen to Deputy Ó Cuív when he suggests they go to the Ombudsman because they will be wasting their time. I do not want to waste people's time, particularly that of busy farmers.

The second issue is that a disallowance essentially amounts to the same thing as a fine. The Deputy was in government for a period and he clearly does not understand how the relationship between the Commission and my Department works in the context of disallowances. If we obtain a disallowance, we are obliged to pay it back. A disallowance is money which the Commission has given us and which it wants back.

That is the €1.4 million.

As a result of its level of compliance, Ireland has one of the lowest rates of disallowance-----

The disallowance is €1.4 million.

-----among the more senior member states. The position is that we must address and correct this situation. We must also correct the maps and recoup money which should not have been given out to farmers because the land in respect of which it was drawn down was not eligible. If we do that, we will avoid the kind of disallowances the countries to which I referred earlier have suffered. Ultimately, it will be farmers who will suffer if disallowances are imposed upon us because I will be obliged to remove the requisite moneys from my Department's budget.

It would be €1.4 million.

Agri-Environment Options Scheme Reopening

The rural environment protection scheme, REPS, 4 came into operation in Ireland in August 2007 and closed to applicants in July 2009. It was one of the measures introduced under the rural development plan 2007 to 2013. There are currently just over 29,000 participants in REPS 4 and their contracts will continue until the expiry of the five year contract period in each case. The final 851 applicants will be exiting the scheme in 2015. The REPS scheme was replaced by the agri-environment options scheme, AEOS, in 2010 as part of the rural development plan. AEOS currently has 20,000 active participants. I am pleased to state that the revised Common Agricultural Policy, CAP, for the period 2014 to 2020 gives priority to agri-environment schemes and requires that the new rural development plan must include such a scheme. I fully support this position. These schemes recognise the vital role that farmers play in delivering public goods through the adoption of environmentally friendly farming practices. The Deputy will be able to discover the numbers involved, etc. from the remainder of the formal reply.

Farmers are inquiring with regard to what it is proposed to do regarding the putting in place an environmental scheme for next year. I have considered this matter and am of the view that it would not make sense to introduce another AEOS next year because by the time farmers make applications and have them approved, it will be the middle of the year. Six months after that we will be introducing a new rural development programme which will incorporate a much more substantial environmental scheme in any event. Next year will essentially be a bridge year.

I would rather concentrate on getting right the environment scheme we will have as part of the rural development programme, having a proper consultation process to do this and introducing the scheme from the start of 2015, as opposed to introducing some kind of temporary arrangement for next year. That means that farmers coming out of the REPS will see a reduction in their income which would have been made up under REPS 4. However, when they came into it, they knew it was a five year scheme. People were calling for an extension of, or a rollover year for, REPS 4, but if we had done that, it would have been very unfair on people who had come out of REPS 2 and REPS 3 and did not get that extension. We do not propose to do this.

The importance of REPS 4 and all of these schemes, particularly in the west and areas in which there is more marginal land, has meant the survival of the family farm. The Minister has referred to the environmental schemes and the new scheme he hopes to bring in, but there will be a gap of approximately six or eight months. What will happen to people who will have no scheme payment coming to them during that period? Where does that leave them? Farmers will be out of pocket for that period. That is my reading of it, if I am reading it correctly. A scheme to replace it which would kick in right away would make the difference between people surviving and being able to continue and leaving the industry. Has the Minister taken this into account?

The Deputy will see those decisions in the upcoming budget. We have to make choices in terms of where we will spend money next year and we will have an opportunity to debate the agriculture budget in the coming weeks. I agree with the Deputy that a REP scheme or an AEO scheme is very important for family farm incomes, not only in the west but also throughout the country. However, the schemes are not about providing income support. Environmental schemes are about paying farmers to do things they otherwise would not do in protecting the environment or to compensate them for loss of income as a result of doing things to protect the environment. That was what the REPS was about. It was a very popular and generous scheme and I would have liked to have continued it and not gone near the AEOS, but we could not afford to do this. The previous Government made the decision to replace the REPS with the AEOS and we continued that policy. However, the question we now need to ask ourselves, as we redesign a new rural development programme for the next six or seven years, is whether it would make sense to introduce a scheme which would probably only last for a six month period and might not even have payments next year as another version of the AEOS when we know that it would be replaced by a more comprehensive approach towards having an environment scheme from the start of 2015. That is why it is very unlikely we will see a replacement scheme for REPS 4 in the immediate future. Instead, we will look for a more comprehensive response in the rural development programme which, as I said, will start from January 2015.

We are talking about the more dependent section of farming. In last year's budget we saw cuts to the farm assist scheme. Will the Minister encourage the relevant Minister to ensure the cuts to the farm assist scheme are reversed as many people will find themselves out of pocket to quite a substantial degree because of what is coming down the road?

The Deputy has said some farmers will find themselves out of pocket because of what is coming down the road, but some farmers will see increases in their income because of what is coming down the road. The Deputy should wait to see the full budget before passing judgment. I think there will be some positive news for farmers in the budget, as well as some frustrations, in particular for those coming out of the REPS. It is important to state I do not make the decisions on the farm assist scheme, but, of course, I sit at the Cabinet table. The decisions were made last year because there had been a dramatic increase in the number of applicants for understandable reasons. We had had a particularly difficult 12 month period from the point of view of weather conditions and a certain sector of farming was under a lot of financial pressure for a period of time.

The Department of Social Protection made the changes in eligibility after it decided it had to try to manage that budget. Of course I will have a conversation with my Cabinet colleague on farm assist this year. I do not want to make any promises in this area as it is not my call.