I would like first to put in context that the rationalisation plan has been driven by the budgetary situation in which Teagasc has found itself, in common with many other State agencies and Departments. Originally our grant-in-aid budget for 2009 was reduced by €10.5 million which, when pensions are stripped out, is a cut of approximately10%. Following the recent budget, additional reductions in our grant-in-aid of €2.7 million were implemented. We are facing a reduction in our grant-in-aid of €13 million, which is substantial. Given the preponderance of pay in our expenditures, the bulk of that will have to be taken by non-pay elements, which obviously is a major concern to us because it affects services. The authority took the view that it wanted to minimise the impact on the services to our farmers, clients and food companies that we are mandated to serve and it was in that context that the rationalisation plan was brought forward. The budgetary position is a critical context. It is important to state that while some aspects of the rationalisation plan would have been necessary in any event, it has been precipitated primarily by the budgetary position.
We have had to take stock of the full complement of our resources across the organisation. As members will be aware, we have a wide mandate that covers research, advisory activity and also education. We have taken full stock of resources across the organisation in putting together the rationalisation plan. The key principle the authority has adopted is that we would try to minimise the impact on priority services for our farmer and food company clients.
Some members may recall that last year we published a report called Teagasc 2030 which identified two issues. First, it identified the type of challenges and opportunities facing the agrifood sector into the future. Second, we identified what Teagasc as an organisation, in collaboration with other stakeholders and agencies, would have to do to be fit to take on those challenges and exploit those opportunities.
For instance, we identified areas of research and science that Teagasc would need to develop, notwithstanding the difficult budgetary position, in areas like animal crop and food bio-science in particular. We also identified the need for common technology platforms, especially in grassland and animal production, to support the industry.
A point I reiterated on several occasions recently is that the agrifood sector is a substantial sector of the economy and particularly important in the current recession. It accounts for 9% of employment and has a major impact in rural areas, with which the Deputies and Senators would be familiar. Exports are a critical feature of agriculture and food and therefore agriculture, because of its low import content, contributes on a net basis much more substantially to gross national product, GNP, than other sectors of the economy. The challenge we face into the future in the first instance is to try to prioritise our areas of activity to ensure we can meet those challenges and do that in a much more stringent budgetary context.
The so-called change plan we produced, which is available on our website, has been extensively covered in the media. That change plan covered all aspects of Teagasc functions. It was drafted in the autumn of last year and completed in the spring of this year. It was fully endorsed by the Teagasc authority in March and we then set out about an extensive internal and external communications plan to communicate what are in many cases very difficult decisions for our staff and stakeholders.
The change plan covers all aspects of Teagasc functions, including agriculture and food research, the advisory service and education. That was important because we had to have a balanced rationalisation plan. It is important in appraising the plan to take note of the fact that we needed balance in the various functions we are mandated to deliver.
We attempted to prioritise programme areas which we believe will be the most important for farming and rural communities in the future. There is no doubt that difficult decisions have had to be taken which will impact on our staff and on our stakeholders but the authority and I believe these decisions are correct for the organisation to take at this time.
I propose to go through the headline features. Deputies and Senators will have questions they want to raise but the first area I would like to draw their attention to is that we have made substantial changes in internal structures within the organisation. We have to examine putting in place a fairly lean management structure if we are to make rationalisations across the organisation. A key decision we have made is to reduce the number of senior managers, that is, heads of directorates, from six to four. We have amalgamated the food and agricultural research directorate. We have streamlined our administration services into a single directorate. We have established what we call a new knowledge transfer and education directorate because a real challenge for an organisation like ours, and many organisations involved in research and development, is to transmit the knowledge we have generated from our science and research into practice on farms and in food companies. Knowledge transfer is a major function and in the current financial difficulties we must exploit our available knowledge to a far greater degree. The final directorate is what we call the area unit directorate. Members would be familiar with the advisory services throughout the country. Those are the senior management changes.
We have made changes also in regard to research and I will identify a number of those for the committee. We have set up a single animal production and grassland research centre to harness the resources of the different elements such as beef production research, dairying, sheep production and so forth in a much more effective way. We have had to take a very difficult decision to discontinue our in-house production of commercial soil analysis at Johnstown Castle. We will issue tenders to private laboratories to supply that service under our control. We have an effective national farm survey, one whose standing is among the best in the European Union, but it is a costly survey and we have to come up with a different model for delivering it.
On the food area, in response to several entreaties from the food sector to deliver technology more effectively to small and medium-sized enterprises, we have established an SME technology transfer service and we will work closely with Enterprise Ireland to transmit the most up-to-date technology for the benefit of the SME sector. That is being done by reallocating staff from lower priority areas to this new service.
Also, we have had to take a close look at our land resources, both leased and owned land, for research. The decisions we have made amount to a reduction in approximately 30% of the land area devoted to research. That will involve a termination of the lease of the hill farm in Leenane which has been used for sheep production and hill sheep research. We will consolidate our research on sheep at our Athenry site.
We have taken a decision also to sell the farm at Kilmaley at which dairying on wet land was examined. That project has reached a natural conclusion. The staff at that farm will be absorbed into priority areas of the organisation. That covers the research area.
On education, the major decision is to rationalise our college structure. As members are probably aware, Teagasc owns four colleges and we also subvent four private colleges owned by the religious orders, the Franciscans and Salesians. A decision has been taken to close Warrenstown College at the end of June. That leaves three private colleges and four Teagasc colleges. We have had to rationalise that college structure, with the primary purpose of bringing about a more effective educational service and enabling us to use much needed capital resources in a more streamlined way.
The educational structure involves the designation of three lead colleges and 11 regional educational centres which will absorb the educational activities that were previously conducted from local advisory offices. The two lead colleges will be Kildalton in County Kilkenny, which is our flagship agricultural college given its scale in numbers of students and teachers, and in Ballyhaise, County Cavan, while the Botanic Gardens will be the lead horticultural college in the country. We are in the process of selecting the sites for the 11 regional educational centres. Clonakilty will be the lead regional centre for the south west and we are in the process of choosing the other sites. We have invited all the private colleges, such as Mountbellew in Galway, Pallaskenry in Limerick and Gurteen in Tipperary, to apply for status as a regional educational centre and we are in the process of negotiating with those organisations.
On the advisory side we have made a number of significant changes in the way we do business. A factor that has motivated the changes we have implemented is the fact that in the past few years technology has completely transformed the way we do business; for example, the mobile telephone is a hugely effective device for communicating with our clients. Farmers appear to like the mobile telephone and use it. They have it with them constantly and it has proved very successful. We also use the web very effectively. Electronic media are used widely throughout the organisation. It has transformed the way we can deliver services and has required us to examine the traditional structures we have had in place for the delivery of service.
We are substantially revising our rural development advisory programme. It is particularly apt at present when there is significant unemployment in the construction sector. Many farmers would have been employed in that sector on a part-time basis. They are now back on their farms and are seeking opportunities to exploit both their farming enterprise and to develop other rural businesses. We are revising the way we structure our rural development programme to try to assist farmers in that context.
Committee members who are familiar with the advisory service will be aware of the so-called good farm practice cohort of advisers. We have had a long examination of that and we are now of the view that a substantial number of those advisers can be reassigned, and retrained where necessary, to a dedicated environment and technology service which will complement our business and technology service. I have spoken previously to the committee about the environment. There are huge challenges before the agri-sector at present of a technical and demanding nature and we believe the service must be able to cope with those demands.
With regard to the rural environment protection service, we are working on a new model to deliver planning services to farmers. As the committee is aware, 101 of the 160 REPS planners are contract staff. These contracts cannot be renewed when the first tranche expires in June this year. The second tranche expires in December, while the final tranche expires in June of next year. Under the embargo announced in the recent budget the contracts cannot be renewed. We face a huge challenge in dealing with this transitional arrangement. In the first instance, we are very concerned about the 101 planners. These are exceptionally talented people who have been delivering a great service for the organisation, and farmers throughout the country appreciate the quality of that service. The planners are mainly young, enthusiastic agricultural advisers who had a not unreasonable expectation in different times of having a career within Teagasc on a long-term basis. However, the budgetary situation has changed that prospect for them.
From Teagasc's point of view, we are very concerned about this. A substantial number of clients, probably up to 17,000, are being handled by these 101 advisers. They generate substantial income for the organisation, which impacts on other aspects of our service. We must be mindful of the impact that a sudden removal of this service will have on the organisation generally. For that reason, we are engaged in negotiations with the REPS planners to put in place an alternative service that would have at its core a sub-contracting element. In other words, these advisers and planners would be invited to become registered contractors to Teagasc. We hope we will make progress on that front. I believe it is a feasible solution to the debacle we face in regard to REPS.
With regard to office rationalisation, the authority has decided on an initial phase. We have approximately 91 offices throughout the country, both owned and leased. It is very difficult to justify such an extensive office network in the current climate. We have closely examined how we might rationalise it and have decided on a first phase reduction of 18 offices, which would reduce the number to 71. Eight of the offices are owned and ten are leased. These offices will be closed over a two and a half year period. Eight will be closed towards the end of this year, eight will be closed next year and two in 2011. The changes will involve 27 locations, in the sense that there will be implications for other offices on foot of the closures. Some offices will be merged. Discussions are also taking place with the Department of Agriculture, Fisheries and Food on the sharing of premises in six locations. This idea of using State resources efficiently has been mooted for some time and we are in the process of trying to make it a reality where we believe it is feasible.
The selection of the 18 offices was based on a number of rigorous criteria. Foremost in mind was the financial viability of an office, so the number of clients served by an office was crucial. We are of the view that approximately 1,000 clients would be required, and it is probably a conservative number, to keep an office going in the long run. Other criteria were the geographical location of our clients, as accessibility was an issue, and the number of advisers in an office, which is tied in with the number of clients. One simply cannot have an effective advisory service in offices where there are only two or three advisers. Critical mass is required to deliver a modern advisory service. Given the complexity of the issues that confront farmers today, there must be the critical mass to have the specialists within an office who can service the needs of farmers. The number of advisers, therefore, was a critical concern for us.
Obviously, the advisers must also be serviced by administrators, so where there is an office there is a requirement for administration within that office. That is difficult to justify with small numbers of professional advisers. Another consideration is the physical condition of the buildings. In many cases they are very old buildings that must be substantially renovated or, in many cases, replaced. We also examined opportunities to merge offices where that was feasible and, as I said previously, opportunities to share premises with other agencies. Finally, in the context of rationalisation, we tried to identify where we could make financial savings in overheads and staff numbers and, in the case of the offices that we own, to realise the capital value for ourselves and the State. An organisation such as ours has huge capital needs on an ongoing basis and one of the ways we can secure capital for the future is by constantly reviewing our portfolio of assets, and offices are a key element of that.
This is the first phase. Obviously we wait in anticipation, if not trepidation, for the report of the so-called An Bord Snip Nua. Clearly, all the indications are that the advisory office network is something they are looking at closely. So I would not be too surprised if, later in the year, we will be obliged to look for even further rationalisation of our office structure.
On staffing within the organisations, I have talked about the advisory contract staff, but more generally the change plan involves significant changes for our staff. We have engaged in an extensive process of consultation by utilising to the full the partnership structure within the organisation. I have led a series of meetings with staff right around the country, so we could explain the logic underlying the rationalisation plan and, hopefully, by working together minimise the adverse impact on our staff and especially our stakeholders. I am happy to say that within Teagasc there is a fantastic esprit de corps. The commitment of people to serve the interests of clients is something which is widely appreciated around the country, especially in the farming community.
As the committee knows, we are no different to the rest of the public service. We have to implement Government decisions. The recent decisions taken in the budget will have a significant impact on the organisation. For instance, we face a complete embargo on the recruitment of all staff and we also face an embargo on promotions. These are severe restrictions. While every organisation is affected, one can imagine that in an organisation like ours that requires highly skilled people both on the research and advisory side, it is difficult to cope with a ban on recruitment. One cannot readily substitute a person that might retire with someone else unless they are technically and professionally qualified.
At this stage within the organisation there has not been a huge interest in the voluntary early retirement programme that has been announced by Government, although I expect people will reflect on its terms. I envisage there will be a significant fall in the permanent staff complement by December 2010. I want to re-emphasise that these adjustments are obviously painful for us and for the clients we serve, but they are essential given the reduction in our grant in aid, which is substantial. We want to try to maintain priority services in these difficult circumstances.
I already mentioned REPS, but I remind the committee that in addition to permanent staff, Teagasc would typically recruit about 200 contract staff across the organisation. Roughly 120 of these would be in advisory services and the remainder would be contract researchers. These contract researchers are employed typically as a result of Teagasc being successful in competitive State and EU-funded competitions. I am glad to say that we have been very successful in this area. However, we now face an embargo that will not only affect the REPS staff but will affect contract research staff. Within the next 16 months, for example, about 115 of the advisory service staff contracts will terminate. Similarly, a substantial number of research contracts will also terminate over the same period.
While a great deal of attention has been paid, and rightly so, to the situation of REPS contractors, I emphasise that on the research side at the moment we have several contractual commitments that involve hiring staff. In other words, we have already won fully-funded research contracts that require us to hire up to 70 contract staff to fulfil the terms of those contracts. With the embargo, however, we face a difficult situation whereby we will not be able to fulfil those contracts even though they are fully funded. So we are facing a very real dilemma.
Into the future, in the normal course of events, we will vigorously pursue all opportunities to win competitive research contracts. If we cannot have a relaxation in the embargo as far as contract research staff are concerned, we will have to reappraise our entire strategy in that regard. We will be potentially in breach of contract obligations on several existing contracts, unless the embargo is amended in some way on the research side, in the same way as we understand it has been done for universities. We collaborate with virtually all the universities on this island, but they are being treated differently to us in this respect. We will be effectively prohibited from pursuing non-grant in aid sources of funding for essential research activity.
To summarise, the change plan for Teagasc — all of us, including the executive and the authority — has involved taking difficult and, in many cases, painful decisions. I assure the committee, however, that those decisions were taken on foot of a realistic appraisal of the implications of the budgetary situation facing the organisation, not just this year but over the next few years. They were also taken in light of our determination to minimise the impact on the services we deliver to our clients. Those decisions have been taken by the authority and the executive is now in the process of implementing them. That will involve extensive consultation with all of our staff in the organisation. The overall objective of the change plan is to ensure that the priority areas of Teagasc's work and services can be maintained in the current difficult economic environment.
An emphasis on investment in innovation — in this case, in the agri-food sector — is one of the strategies that I have no doubt will enable the economy to emerge out of the recession. Innovation is at the core of competitiveness, which is what we are about in Teagasc.
