On behalf of my colleagues I thank the Chairman for the invitation to address the committee. We had a little difficulty with the snow since last December so it is good to be here today.
I have circulated a copy of the presentation which will be available as a PowerPoint presentation. The committee is no doubt aware that like many other organisations, Teagasc is going through a process of substantial change. At yesterday's meeting of our authority it signed off on the next steps of the change programme. My presentation today will bring committee members up to date on the issues involved in that change programme.
With regard to the goals of the rationalisation programme, the first and foremost issue for Teagasc in terms of its ability to deliver its services has been substantial disimprovement in the ratio of our pay to non-pay. This has happened as a result of the budget and it puts huge pressure on our capacity to deliver services. It is compounded by the fact that uniquely among many State agencies, Teagasc's grant-in-aid includes provision for our pensioners. In the past year in particular, accelerated early retirement caused considerable difficulties in funding terms.
Nonetheless, Teagasc in its rationalisation programme is determined to ensure excellence in its our core activities. We are continuously trying to ensure that resources are allocated to key national priority areas and this will mean, in some cases, a reduction in or elimination of activity in some areas considered to be of lower national priority. We are focused in particular on the medium term and our planning is on a three to five-year basis. Teagasc is an organisation with three principal functions: a research function in the agrifood sector, an advisory function and an educational function. In the rationalisation programme we have tried to ensure balance, such that no one area would be singled out above others. No doubt the members of the committee will be aware of the broad set of circumstances we face and have faced in recent years.
I talked earlier about what is emerging as an unsustainable situation, the ratio of pay to non-pay. Pay now absorbs about 76% of our budget with non-pay at 24%. This is down from a ratio of close to 60:40 a couple of years ago and this puts us under severe pressure. Our staff are well paid and well educated and trained but we need resources to enable them to go out into the field and do their job. This is a key problem at present.
The Teagasc grant-in-aid was reduced in 2009 relative to 2008 by about €12 million and it has been reduced for 2010 by €2 million, although some anticipated that it would be far worse. Nonetheless, we are talking about a grant-in-aid reduction of €14 million over two years. The relevant base is about €90 million, a substantial reduction in two years.
I draw the attention of members to the fact that Teagasc has traditionally generated a significant amount of income from external sources, in other words, non-Vote sources. This includes direct fees from farmers and income generated from involvement in competitive tenders for research competitions, both within Ireland and internationally. In the current climate this resource has dried up and we are facing into a drop of €9 million this year in externally generated income.
In March 2009, Teagasc introduced a change programme known as the first steps, the central objective of which is to try and stabilise the ratio of pay to non-pay. I will deal with pensions because I would like the committee to be conscious of the issue. At the beginning of 2009, our initial estimate for the lump sum element of retirement in 2009, based on all the available information, was for a lump sum requirement of €11.4 million. The outturn was closer to €11.6 million. As the year progressed, potential pensioners became very concerned about the security of their pension income and the lump sums and we are all aware of the context. However, this meant that we had to find close to €7 million from our operational budget and which we could not have anticipated. This caused significant difficulty for the organisation and it has eaten into our non-pay resources.
In those circumstances it would be highly imprudent of us not to seek out every available opportunity to reduce overheads and to effect efficiencies. This is what we have tried to do over the past couple of years and what we aim to do in the future. I draw the committee's attention to the fact that we do not have a capital budget nor have we had a capital allocation for the past two years. Any research organisation is required to make investments in its research infrastructure to fulfil the needs of the agrifood industry.
I will give some examples of the kind of investment we will need to make over the next few years. The first one that comes to mind would be our pigs facility in Moorepark which is now nearly 40 years old and badly in need of refurbishment. We cannot continue to service the pigs industry without replenishing that facility and investing in a new one.
Another area of immediate concern is the pressure on both the agrifood and environmental areas as regards climate change and the water framework directive. Within Ireland generally — and within Teagasc, our direct responsibility — the resources devoted to emerging issues on the environmental front are grossly insufficient. We urgently need to make capital investment to produce the kind of research information needed. The only way we can garner the necessary capital funds is to examine our portfolio of property. If we identify opportunities for rationalisation, we may be able to use our portfolio in a strategic way, for the betterment of the sector. In the budget context, the capital need is a critical driving force behind the rationalisation programme that is under way.
Teagasc, like any research, advisory and educational organisation is all about its staff. I am glad that dedicated and quality staff have always been the hallmark of the Teagasc service. We have faced a severe reduction in staff numbers, particularly over the past year. By the middle of this year, more than 200 staff will have departed. As the committee is aware, the contracts of the REPS staff will not be renewed. Two groups of staff left the organisation in June and December of last year. The contracts of the final group will terminate in June of this year. The organisation has also lost a significant number of other officials.
In addition to the loss of skills, which is very serious for a research organisation like Teagasc, we are losing some income-earning capacity. The departure of advisers obviously leaves a void, in terms of their capacity to generate external income. We estimate that this loss will be worth between €7 million and €9 million in 2010. Numbers do not always indicate the real significance of an adjustment of this level. In the past year, the organisation has lost 20 senior researchers through early retirement and normal retirement. In the advisory area, we have lost four programme leaders in key programmes like environment and dairying, to name a couple. That leaves a serious skills void. We are trying to replenish that void through internal redeployment of staff. As the committee knows, we face an embargo on recruitment. The staffing situation requires us to look carefully at all our overheads. In some advisory offices, there will be a significant reduction in staff numbers at the front line. The administrative support system will continue to be expensive. Clearly, that is not sustainable.
A programme of rationalisation is being implemented across all the functions of the organisation. Starting with the advisory service, the key point to note is that by the end of 2012, we expect that there will have been a reduction of close to 40% in all advisory service staff. We also expect a decline in client numbers, although we are holding our own at the moment with approximately 40,000 clients in total. More than half of our clients are REPS clients. Obviously, the removal of REPS creates uncertainty about whether those clients will remain with Teagasc. We will do our best to ensure we offer them services so that they will wish to continue with us.
On the basis of the reduction in staff numbers and the possible reduction in clients, particularly on foot of the elimination of the REPS programme, it is obvious that our existing office network is simply not sustainable. In January 2009, we had 91 offices around the country, between owned officers and leased offices. It clearly was not sustainable. The McCarthy report, which was produced last year, recommended a substantial reduction in the number of offices managed by the Department of Agriculture, Fisheries and Food and by Teagasc. A combined total was recommended, with 25 offices being maintained by Teagasc across the country. Our assessment of the report is that while there is clearly a need to rationalise, given the budgetary and staffing situations, we cannot maintain a national service without at least 50 offices.
In the next phase of our rationalisation programme, we have identified a means of reducing our number of offices to 50 over the next three years, from last year's figure of 91. The committee is aware that the Department of Agriculture, Fisheries and Food indicated last July that it intends to reduce substantially its number of offices. In addition, we have agreed with the Department to share premises where feasible, which makes a great deal of sense. We have agreed in principle to share premises at six identified locations and therefore reduce overheads all around. That is in the process of being implemented.
I wish to discuss what the advisory service does. We have been trying to make a point over the past year. Naturally, there has been concern about advisory offices throughout the country. Notwithstanding the need for rationalisation, our point has been that we have to focus on the service rather than the location. The service is about having good programmes, which are targeted to the needs of farmers, and good people. Quality people are the essence of our service. When I visit offices, I do not like to see them populated with too many advisers, especially in light of the increasing role of modern communications. I prefer to see advisers working out in the field. Most of our commercial farmers hold that view as well. We have been looking closely at our services. The business and technology service, which is targeted at commercial farmers, is the flagship service. The discussion group model is the core of that service. It has served us very well. It has also served farmers very well. We are glad to say we can embark on an expansion of the discussion groups because money has been made available to that end. We hope many more farmers around the country will join the new discussion group initiative.
We are looking very closely at the requirement coming through for many farmers in relation to high-level environmental advisory services. In the case of commercial farmers, in particular, there has rightly been a great deal of emphasis on environmental schemes like REPS, which is very important. Farmers are dealing with the complexity and demanding requirements of the various environmental directives. There is a service opportunity to focus on the technology aspect of environmental advice, as opposed to the scheme aspect of it.
We are also looking closely at the whole area of rural innovation and rural development. That will obviously be more important at EU level in the years ahead. We see an opportunity in the context of the Leader funds that are available. There is implicit earmarking of a significant amount of funding for farm households. In discussions with the Ministers, Deputies Ó Cuív and Smith, and with the Leader organisations around the country, we have taken the view that Teagasc is in a good position to ensure that farm families capitalise on the resources that have been set aside for that purpose. We hope to work closely with Leader over the coming years on that. Obviously, we also talk to our stakeholders, particularly farmers, about having a more stable long-term source of funding. The current climate is not the best time to suggest to farm organisations that they should contribute a little bit more. Nonetheless, we feel that some sort of tripartite funding arrangement will have to become more widespread in the future. It is obvious that State funding will continue to be needed for public good services, like the environment, and for the overall proportion of exports and competitiveness. Contributions from across the agricultural and processing sectors could be examined. We still receive the individual fees farmers are happy to pay to get the one-to-one advice they need.
There has been a massive growth in the number seeking places in all educational establishments across the country. Agricultural education is no different. We offer further education and are also involved with the institutes of technology across the country in the provision of higher education. The numbers have been growing at a staggering rate in recent years, as with other educational providers. We have had to try to cope with this, albeit with a reduced budget.
We put in place a new structure that we believe is more streamlined and better able to cope with the demand. We have now merged our college offerings with what we used to offer in local advisory areas by setting up 12 regional education centres strategically located around the country and by working in harmony with our colleges.
We have a major difficulty with the remaining private colleges. Many members mentioned this to me. There are three such colleges providing agricultural education, in Pallaskenry, Mountbellew, and Gurteen in County Tipperary. It costs us approximately €4 million per year because Teagasc must subvent the staff. We contribute to the upkeep of the colleges but also subvent the students through maintenance grants and so on. The problem is that the €4 million comes from our non-pay budget. I referred to the fact that this budget is really squeezed and we are under severe pressure in that respect.
Apart from the budgetary problem, the real difficulty in regard to the future of the private colleges is that the staff are not Teagasc staff. They are the employees of the organisations that own the colleges. They are not public employees. Members will be aware of what happened in Warrenstown. The college was closed and we absorbed the staff. The issue came to light and caused many difficulties and much soul searching. The staff, on being absorbed into Teagasc, were essentially converted into public employees with all the implications this would have for the management of resources in the public sector, particularly numbers.
We are under a strict obligation not to engage in a similar practice. It is quite serious because vacancies that arise in the private colleges in the normal course of events cannot be filled because of the recruitment embargo. Even if we had surplus staff within the Teagasc organisation, we could not transfer them to the private colleges. If we did, we would trigger the transfer of undertaking legislation, which was applied in the Warrenstown case. The vacancies are now mounting in the colleges, as one can imagine, and this is exerting severe pressure.
The very least the colleges will have to do is refuse entry in the autumn because there will be fewer staff. More critically, one cannot offer an education programme in any area, particularly in agriculture, without a minimum number of core staff. We are actively engaged in discussions on this with the Department of Agriculture, Fisheries and Food and the Department of Finance.
The final area of responsibility is research. I noted we lost 20 researchers last year and more are on the point of retirement. Many of the so-called external income sources have dried up, principally national ones. The committee will be familiar with the stimulus fund, which was very innovative, and the firm fund, which was targeted at the processing sector. There will be no calls in this regard this year, which is a concern.
The research side of the organisation is totally different from the administration side in that if one loses a specialist in one area, one cannot simply transfer someone into the position. We have lost significant expertise in plant pathology, which is a highly technical area. There is one plant pathologist in Oak Park who will retire shortly. One cannot have a credible research service for the tillage sector, particularly the cereal sector, without having a top-class plant pathologist. We will seek a special exemption to recruit one.
We have lost key staff in beef research and the manager of Moorepark Dairy Technology Limited, a highly innovative facility servicing the dairy processing industry. We have lost dairy nutrition experts and we will lose expertise in the sheep sector. We have lost expertise in horticulture. We must cope with this and are operating on a restricted budget by prioritising, re-prioritising, reducing overheads and considering new ways of delivering research. For example, we are trying to conduct more research on farms. This is suitable for a certain type of research, the more commercial type. It will not replace laboratory-based research or experimental field research, both of which are necessary. It will certainly afford us an opportunity to deliver a more commercially oriented service.
We are seeking to increase the number of links with the food industry. At the behest of the industry, we have an exceptional resource at Moorepark and the facility in Ashtown, which services the meat industry. We have been meeting the food companies regularly and saying the resource is publicly funded and available to them. It is a question of finding a more effective way of transmitting that knowledge to the industry to generate employment and export growth.
The position we have taken in recent years with the onset of the budgetary constraints is that, rather than sit back and let outsiders dictate how we should change and effect efficiencies, we have been proactive. We proposed what we believe is the best possible way of rationalising the organisation in the circumstances.
We would like to believe we have rationalised in a balanced way, taking account of the differing needs associated with research, education and advice. We hope we will persuade the Government there is need for investment in research. We do not expect the Exchequer to fund it fully but believe that by carefully managing our profit portfolio, we can facilitate the necessary investment. Priorities are essential. We must re-prioritise and examine different and more cost-effective ways of doing our business.
We have substantially slimmed our senior management structure. When I began as director, there were six senior managers. The latest proposal will reduce the number to three. This is a substantial cut but it only reflects the reduction across the organisation.
We want to focus more on integration. Whenever Teagasc is reviewed by internationals, they notice the potential benefit of having research, education and advice in one organisation. This is certainly true. We can leverage that potential much more by having much greater integration, especially between the advisory and research sides. We have been working to achieve that recently.
Our mission is very much focused on delivering science-based innovation support. This involves building scientific capacity and ensuring we are among the best. We would like to think that in some areas, such as genomics, we are ahead of the best. Our work on animal genetics in conjunction with the Irish Cattle Breeding Federation is internationally recognised. Our work in grass production and utilisation is up there with the world leaders, New Zealand.
I am focused on streamlining our administrative structure by which savings can be made. In all of this difficult adjustment for staff and stakeholders, we have tried to maintain open lines of communication with our stakeholders. Consultation committees for every branch of our activity are in place. This is important in a time of real change. While we have gone through a difficult adjustment period, we aim to come out as a stronger organisation, more relevant and more flexible. We have to be able to respond to changing requirements. Doing so will ensure we are enabled to continue the kind of service farmers and food companies expect from the organisation in the long term.
