I thank the joint committee for its congratulations. As the Chairman said, I am new in the position of president of the ICMSA. If the farming sector was ever at a crossroads, it is at one now. We need the support of the Government and farming bodies more than ever.
I intend to discuss the main points of our detailed submission which is available to the committee for examination. The principal point we must get across to the Government and the Commission in Brussels has to do with farmers' incomes. It is a key issue and the underlying problem in all aspects of our submission. It must be addressed. For many years farmers have been accused of crying wolf. Unfortunately, farming is now in deep trouble and farmers' incomes are under severe pressure. If young people are to be attracted into farming, we must address the problems facing us which are varied and very complex. They are dealt with in detail in our submission to the committee. The critical problem which governs everything else is farm income.
For several years farmers have been in receipt of premia, now converted into the single farm payment, which have been a cushion against the real market forces. It is hoped the single farm payment will be paid every year for the foreseeable future. It has been reduced and the reduction will be 8% by 2008. This does not take into account the effect of inflation on the payment. While this was a cushion for farmers in the past, the benefits will be greatly reduced in the future. This combined with falling output prices is putting farmers' incomes under unprecedented pressure.
As farmers' representatives we have been referring to the price cost squeeze for many years. The figures on input prices and the cost of what farmers are buying are contained in our submission. I refer to a number of specific areas where farmers face problems. The first is the effect of the WTO on farmers. Little progress has been made since Hong Kong, which has been overtaken on the national stage by the nitrates directive. The WTO will have profound implications for farmers which cannot be ignored.
What was agreed in the mid-term review in Luxembourg must stand. Our view is that a deal is a deal and it is to last until 2013. There can be no further rowing back from that position. We are greatly concerned that the Commission will concede beyond what was agreed in the mid-term review. Agenda 2000 was agreed to last for eight years but the mid-term review reversed that decision and it was completely revamped in 2003. We hope the Government will insist that what was agreed under the mid-term review must stand.
The other aspect of the WTO of concern to farmers is food security. In the last months there has been foot and mouth disease in Brazil and the threat of avian influenza to both human and animal health and to poultry. This should bring home to European consumers that we need our own food and food security. The CAP was established after the the Second World War on the basis of feeding European people. We have become a very wealthy and affluent society and there is a perception we can do without producing our own food. Nothing could be further from the truth. Food security should be a number one priority for an affluent society.
Lessons can be learnt from the United States in this regard. They are very good at promising access to the American market to Third World countries but as soon as the deal is concluded, they find some reason for excluding those products. Ireland and the United States are the two most progressive economies in the WTO. There is much common ground to be found between ourselves and the Europeans in the WTO debate. The European Union has given a promise to eliminate export refunds by 2013. Ireland is dependent on these export refunds more than any other country in Europe. This undertaking was given in the context that the Americans would do the same on the export subsidies they operate in their economy. It is time for the Europeans and the Americans to sit down together and try to ensure that both those economies will still have farmers in the future. If the United States and Europe do not co-operate in the WTO, the farmers in both places will be the losers. I suggest that Ireland should promote the strategy of Ireland and the United States facing the WTO together to ensure that the farmers in those economies have a protected home market to a certain extent.
The submission details sensitive products and the dangers to the dairy and beef sectors. Other sectors will raise these issues with the authorities. There are major problems regarding export refunds and access to our own markets. When the South American beef came in, it had a detrimental effect on beef prices. It brought home how vulnerable we are. The European Union has forecast it will be 530,000 tonnes deficient in beef production, yet these imports undermine the price of our product. The WTO is a complex organisation and we know there are huge pressures to agree a deal. Our point is that European farmers cannot be sacrificed to make a deal and must be protected in any WTO agreement.
Our submission deals also with the nitrates debate. Never has an issue attracted as much attention on the farming front. The issue has been badly handled on a number of fronts. We are very critical of Teagasc, its role in this debate and the consequences. The problem for farmers will not be solved by blaming different organisations or Government Ministers. The nitrates issue will be finally decided in a few weeks. It is imperative that farming should be able to continue once the statutory instrument is fully implemented.
The ordeal of paperwork terrifies farmers. We met the Minister for the Environment, Heritage and Local Government last Thursday and put proposals for simplifying the statutory instrument to make it more practical in use and asked him to allow essential leeway in its implementation. It would be unthinkable if farmers were criminalised for minor breaches of this statutory instrument. It is essential that a code of practice be implemented in conjunction with this statutory instrument so that farmers and the various agencies will know exactly what is and is not tolerated. There must be tolerances built in to allow for a farmer exceeding the amount of nitrogen he is allowed to spread or exceeding his stocking rate by a small margin and he should not be immediately criminalised for small breaches. Our organisation does not tolerate pollution and we fully accept that a person found to be polluting is guilty of an offence. However, the new statutory instrument must have some built-in tolerances and a code of practice is essential.
The Government can help farmers with regard to nitrates. There are development charges in 11 county council areas. Farmers must undertake significant investment, unprecedented in the history of agriculture, to upgrade their yards to the required standards under the new nitrates regulations. It is inexcusable that development charges are being imposed on farmers by certain county councils. We raised this point with the Minister, Deputy Roche, last Thursday and we hope it will be addressed in the near future.
A grants scheme has finally been introduced and a grant system is in place for the years 2006, 2007 and 2008. It is essential that the top rate of grant is paid for those three years. Three years could be a very narrow window of opportunity to get the work done because the amount of agricultural builders available has been greatly reduced in recent years and it will be hard to get the building done. It is essential that the grant rate is maintained for the three years.
We feel very aggrieved over the costings for the grants. The standard costings have not been updated since September 2004. We got a commitment from the Government in the last partnership agreement that they would be updated on 1 January each year. Two — let us call them — gale days have passed and standard costings have not been updated. Anybody applying for a grant does so on the basis of costings that are almost two years out of date. This is completely unacceptable and considering the amount of money farmers need to spend, the issue needs to be addressed as soon as possible.
We will not get a derogation from the nitrates directive until the statutory instrument is in place. It is urgent to have the statutory instrument implemented and whatever changes we can get agreed as soon as possible. The derogation is essential for 10,000 or 12,000 farmers who are principally dairy farmers. As the Senator from west Cork will know, many of them are from the west Cork area. They represent the core of our future dairy industry. Our submission makes detailed proposals on a derogation. It is essential that the derogation is framed to allow those farmers keep their competitive advantage. Our advantage over the rest of Europe lies in our ability to grow grass. Those 12,000 farmers have consistently done that as well as, if not better than, anyone else in the world. The association will put considerable work into the derogation. We feel that Teagasc and the Department of the Environment, Heritage and Local Government have a job to do in Brussels. We feel they have not started from a good base to get the changes needed in the derogation. However, they need to focus on it. To have a competitive dairy industry, I cannot stress enough the importance of getting the derogation right. The details are contained in our submission. We want to be able to farm after implementation of the nitrates directive and keep the competitive advantage we have as Irish farmers. We want to keep the paperwork to a minimum to ensure farmers are not criminalised for minor offences.
Two or three weeks ago the Minister announced her proposals to free up quotas and a quota exchange. We are very critical of the Minister's announcement. She has absolutely ruined the milk structure for 2006. There will be virtually no milk in restructuring in 2006. Approximately 35 million to 40 million gallons are traded through restructuring annually and this will reduce to a trickle this year. We have a number of points to make against the quota exchange, which has been inadequately considered by the Minister and her officials. If an exchange is introduced, it is certain that there will be a higher price per quota for active milk producers. Incomes are under severe pressure as it is and there is no way that active dairy farmers can carry any extra cost per quota.
Deputies and Senators from the west and north will recognise that the introduction of an exchange will have implications for the future of ring fencing. If quota in the Connacht Gold area is making 40 cent and quota in the Glanbia area is making €2.50 per gallon, ring fencing cannot survive and it will destabilise. Milk will flow out of the western and northern regions to the south and east. This has huge implications for those rural areas, for milk processing in those areas and for the farmers who want to remain farming in those areas.
In addition the quota will not go to those who need it most. Small to medium-sized producers have always been granted the advantages in restructuring and they have been regarded as priority categories. Those farmers are the ones who want quota the most. We all accept that farmers need to scale up to meet the challenges before them. However, farmers in an exchange situation will not be able to afford the milk quota, which will go to larger producers. In an auction the bigger players always win. Young dairy farmers entering the industry will be faced with a far steeper hill to climb.
Our farms are very fragmented and do not lead to holdings producing large amounts of milk, which is another reason the exchange would not work in the Irish context. The most important point is that we have approximately 24,000 dairy farmers in the country. Quotas will free up on a European basis whether it is in three, four, five or six years time. As a dairy industry are we better off with 10,000 men or 20,000 men milking cows? To face the challenges of the future and with the advantages we have over much of the rest of Europe we would be far better placed with 20,000 dairy farmers rather than 10,000. We met Department officials last week to discuss quota exchange. They told us there would be full consultation during the spring and early summer. I hope they will take our views on board. We would be very grateful if this committee advised the Minister of the dangers in the area of offering up quotas.
The CAP rural development plan will run from 2001 to 2013. It is of vital importance to farmers. Considerable money has been put into farming through the CAP rural development plan in recent years. As an association, we feel €380 million is needed annually from the Exchequer to keep the present schemes in place. These schemes have played a huge part in trying to maintain farmers' incomes in recent years. I refer to schemes such as REPS, early retirement, installation aid, farm waste management, dairy hygiene, disadvantaged areas and forestry. Those are very important schemes for rural Ireland and it is essential that the funding is maintained to keep the schemes operational. This item will be at the top of our shopping list at the partnership discussions. We feel that the Government owes it to rural Ireland at a time when farmers' incomes are under pressure to put this Exchequer funding into rural Ireland. The amount of money coming from Brussels is reducing as we have lost convergence status. The onus is on the Government to make up the shortfall.
We have many problems with the various schemes, on which we will enter detailed discussions with Department officials. Our submission lists three of the main problems, one of which is the budget. For some time we have been pushing for a REPS for intensive farmers. With the new scenario after the introduction of the nitrates directive, restrictions will be placed on those intensive farmers. They feel they meet many of the requirements under REPS and we feel the new REPS 4 gives scope to accommodate those farmers. We feel it should be actively promoted and progressed. It would be a great help to those farmers to meet the cost of compliance when the nitrates directive is implemented.
The farm retirement scheme needs to be revamped and upgraded. The old scheme has had a number of problems and there has been talk of scrapping it. We feel the farm retirement scheme has a very important role to play in the structural change required to meet the modern challenges facing us. We feel a number of things can be done. First, the maximum pension should be increased to €18,000 per annum. That would be a major improvement. Second, some of the anomalies relating to age and income limits should be abolished. The early retirement scheme offers great opportunities to help to achieve the restructuring that is needed.
I would like to outline what the Government can do to facilitate land restructuring. We all know that farmers will need greater scale in the future. The ICMSA does not agree that increases in scale along the lines of those suggested by Professor Gerry Boyle two or three months ago are needed. He said in the farming section of the Irish Independent that farmers will require 140,000 gallons of milk if they are to earn a modest income. I will mention some of the things that the Government can do to provide for the increases in scale which are needed. It can take action in respect of stamp duty, for example. The first concessions relating to stamp duty were included in the second-last Finance Bill, when it was deemed that the exchange of land was to be exempt from stamp duty. The ICMSA believes this measure needs to be extended significantly. Full-time farmers have to be given an advantage over non-farmers in the stamp duty exemption scheme. The rate of stamp duty on the purchase of land is currently 9%, which makes it virtually impossible for farmers to buy land. One of the offshoots of our vibrant economy is that many non-farmers are buying agricultural land. If the Government is to help farmers to compete, it has to do something to tilt the balance in favour of them. It could do that very easily by making changes to the stamp duty regulations to assist full-time farmers.
There has been a great deal of criticism of the rule under which farmers have to pay capital gains tax of 20% to the Government when their lands are compulsorily purchased. A roll-over relief facility needs to be introduced in cases of exchanges of assets by farmers. We are aware that holdings in this country are fragmented, but the capital gains tax system makes it hard for farmers to sell outlying areas of their farms to buy lands nearer home. That has to be addressed by ensuring that farmers who are trying to consolidate their holdings are exempt from capital gains tax. By the time they have paid capital gains tax and stamp duty, and are trying to purchase land nearer home, farmers may have lost one third of the money they were paid for the land they sold. That makes it virtually impossible for them to consolidate their farms. If dairy farmers' lands are not easily accessible from their milking parlours, such lands are of no use to them for production. Some simple things could be done to make the consolidation of holdings, which should be a priority, much simpler for farmers.
The ICMSA is in favour of the introduction of tax relief on the purchase of land. Full-time farmers should be allowed to write off the purchase of land as an income expense against taxation. Such a break would allow full-time farmers to compete in the purchase of land, the cost of which is constantly increasing. Tax exemptions are in place for the leasing of land on five-year and seven-year leases. The ICMSA strongly believes that an anomaly in this regard — that leases between family members are not eligible for such an exemption — has not been addressed by successive Ministers for Finance. We have been told by Ministers that family leases are not included in the scheme in the interests of preventing tax avoidance. We have responded by pointing out that if such leases were provided for in the context of the early retirement scheme, there would be no question of tax avoidance.
The parent who hands over the land in such circumstances signs a form to declare that he or she has ceased farming completely. Therefore, the issue of tax avoidance does not arise. The ICMSA, which prides itself on its representation of farm families, finds it hard to accept that if a father leases land to his son he cannot be eligible for tax exemption, but if he leases it to a stranger from four or five miles away he is eligible for a fairly sizeable tax exemption. We need to address such unfair anti-family regulations, which do not help those of us who are trying to help farm families to stay in rural Ireland.
I would like to speak about the issues of over-regulation and compliance costs. As someone who attends farmers' meetings a couple of nights each week, I can assure the committee that such issues annoy farmers more than anything else. Farmers were promised they would be given the freedom to farm after the mid-term review, but the opposite has been the case. The farming sector is highly over-regulated at present. Farmers have to deal with cross-compliance regulations, the nitrates directive, the new veterinary medicine regulations, tuberculosis testing, BSE rules, animal transport regulations and the rules relating to special areas of conservation. New legislation has been introduced to provide for veterinary medicine regulations. The cost of veterinary medicine has increased by 25% since 1996. In the same time, the costs of products for plant protection, to which similar regulations are not attached, have increased by just 0.8%. Such statistics indicate that compliance measures are taking a great deal of money from the pockets of farmers.
Dairy farmers have to pay a range of disease levies. A dairy farmer who is producing 50,000 gallons of milk has to pay €480 in levies to the Government each year. Given that farm incomes are under pressure at present, the ICMSA believes that such levies should be suspended for at least two years, until we see how the markets respond. While €480 does not mean much to the Exchequer, the suspension of the levies would show that the Government seriously intends to address the problem of farmers' incomes. It would be seen by farmers as an indication that the Government is trying to do something to solve their income problems. It would not cost a significant amount of money, in the context of the overall Exchequer receipts, but it would demonstrate a willingness on the Government's part to try to help farmers.
I have outlined some of the problems which are being faced by farmers. The policy makers are not helping farmers by imposing many charges, increasing the levels of bureaucracy and reducing their level of support for the farming sector in general. That needs to change if the future of farming is to be protected. Holiday homes and non-farm families are welcome in rural Ireland, but it would be a very sorry and much poorer place without farmers and a vibrant farming industry.
The ICMSA believes that the family farm structure is worth protecting. Our policy makers must take some steps in that regard before it is too late. The joint committee can play an important role in redirecting the focus of agricultural policy to ensure it truly supports the family farm structure. As I said, the protection of farm incomes will help to keep that structure intact.
