JOINT COMMITTEE ON COMMUNICATIONS, NATURAL RESOURCES AND AGRICULTURE debate -
Tuesday, 8 Nov 2011

Pre-Budget Submissions: Discussion

Chairman

I welcome all of our witnesses to today's meeting. This is the first occasion on which all the organisations have met together with the joint committee. I welcome Mr. John Bryan, president, IFA; Mr. James Kane, chairman, IFA farm business committee; Mr. Tom Turley, chairman, IFA rural development committee; Mr. Pat Smith, IFA general secretary; Mr. John Comer, deputy president, ICMSA; Mr. Ciarán Dolan, general secretary, ICMSA; Mr. Willie Ryan, chairman of the taxation committee, ICMSA; Mr. Gabriel Gilmartin, president, ICSA; Mr. Eddie Punch, general secretary, ICSA; Mr. John Cleary, ICSA livestock co-ordinator; and Mr. Alan Jagoe, national president of Macra na Feirme. This is Mr. Jagoe's first appearance before the joint committee as national president. Also present are Mr. Derry Dillon, agriculture affairs manager and Mr. Edmond Connelly, CEO, Macra na Feirme.

Before proceeding, witnesses are protected by absolute privilege in respect of the evidence you are to give this committee. If you are directed by the committee to cease giving evidence in relation to a particular matter and you continue to so do, you are entitled thereafter only to a qualified privilege in respect of your evidence. You are directed that only evidence connected with the subject matter of these proceedings is to be given and you are asked to respect the parliamentary practice to the effect that, where possible, you should not criticise nor make charges against any person(s) or entity by name or in such a way as to make him, her or it identifiable.

Members are reminded of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the House or an official by name or in such a way as to make him or her identifiable.

We will commence with a presentation from the IFA, followed by presentations from the ICMSA, ICSA and Macra na Feirme. I would appreciate if witnesses could confine their presentations to ten minutes. On conclusion of presentations, I will call on the spokespersons to put their questions or make comments. Following this, I will invite witnesses of all groups to respond before opening up the proceedings to the remainder of committee members. Is that agreed? Agreed. I now invite Mr. Bryan, president of the IFA, to make his opening statement.

Mr. John Bryan

I welcome this opportunity to speak to committee members today. This is an important time in the context of the upcoming budget. Many items up for discussion in the budget are of great concern to farmers. The importance of Irish agriculture to the economy must be borne in mind. Agriculture and food create more than 300,000 jobs in the greater economy and is worth €25 billion. A clear indication of the contribution which agriculture can make to the economy is the rise in exports of foods and drinks during the past few years. Despite bad weather and bad commodity prices in 2009, food and drink exports were worth €7.2 billion. Following a little recovery last year in terms of weather and prices, food and drinks exports amounted to €7.9 billion. The amount this year is expected to be €9 billion. That is a huge contribution to this economy at a time when Ireland needs to persuade the IMF-ECB-EU we are different from Greece and have a solution to get us out of the financial difficulties we are in.

Agriculture alone will not turn the economy around but it is an important part of it. Irish agriculture, unlike agriculture in most other countries in the world, is sustainable. It is a grass based, low carbon production family farming structure. It must be borne in mind that we use less carbon or water per kilo of beef, dairy solids, lamb or grain produced than do several other countries. There are currently more than 7 billion people on the planet and countries like Ireland that have the capacity to increase production will have to be supported.

We are facing a review of CAP which is of significant net benefit to Ireland. Under the single farm payment alone, Ireland draws almost €1.3 billion and €350 billion under the rural development scheme. These are net inflows into the Irish economy which create more wealth. It is very important that the Government gives a clear signal to both Europe and everybody else that it will support agriculture and that it wants to retain this money into the future.

Agriculture has gone through a tough time over the past few years. I have referred to weather conditions and the costs of production. Our main ingredients of feed, fertiliser and fuel, have risen in price substantially. It is very important that in order to develop exports, the balance must be kept between costs and inputs and the prices obtained for produce.

In order for the agricultural economy to make a bigger contribution to the overall economy and to our economic recovery, certain aspects are very important and confidence is one such aspect. It is very important to nurture the confidence one can see at any cattle mart in any part of Ireland today because this is good for the overall economy. We have to be competitive and issues such as the carbon tax do not help to make us competitive. Every bit of extra food we produce in Ireland will have to be exported. Food Harvest 2020 proposes to develop that market. Regulation is very important as are the costs of production. We must not put ourselves at a competitive disadvantage to other countries if we want to grow our exports to other markets such as China.

Other aspects of importance are innovation and education. Resources must be invested in agricultural education and agricultural colleges must remain open. The availability of credit is essential. I refer to banking charges as this is an aspect to which the Government must pay close attention. Considering that the taxpayer has re-financed the banks it is important that capital is made available for the export sector.

This Government's first budget will be announced in December. It will be a test of its support for jobs and exports. Along with meeting the commitments given to the IMF and others, it is crucial that Ireland signals that we are different from Greece. This is my message to this committee. It is very important that jobs and exports are supported. If we want to achieve the targets in Food Harvest 2020, this budget has to be about jobs and exports.

During the summer, the IFA commissioned UCD to produce a report on the value of agriculture to the economy and this report was circulated to all Members of the Oireachtas. It showed that every euro generated in agriculture was worth €2 to the economy. This money is spent in every parish in Ireland. Agriculture is important in every parish in the country in the creation of jobs. While there is an air of optimism in agriculture and we have shown the extra contribution made by it, incomes in agriculture are still quite low, including the direct supports from Europe and national supports. Farm income, on average, was less than €18,000 last year.

I wish to speak in detail on the forthcoming budget with regard to schemes and taxation. Funding for farm schemes is redistributed throughout the rural economy, maintaining and creating jobs through expenditure by farmers on locally provided inputs, labour, goods and services. The proposed funding allocation for the agriculture budget in 2012, outlined in the National Recovery Plan 2011-2014, represents a cut of over 20% for the 2011 allocation. This is far in excess of the cuts expected of any other Department, with an average proposed cut of 4%. The cuts proposed for the agriculture budget are inequitable, will cause damage to the sector and cannot be accepted. With average farm incomes in 2010 of less than €18,000, farmers cannot afford any further cuts in funding for vital farm schemes. This will undermine activity and output at farm level, damaging the potential of the agrifood industry and reducing growth in the national economy, thereby putting further pressure on the public finances.

The main IFA proposals on expenditure in budget 2012 include: reopening AEOS for all farmers leaving REPS 3, with approximately 13,000 farmers leaving in the period from last May to May 2012; the retention of funding at current levels for all other farm schemes, the disadvantaged areas, suckler cow welfare, REPS 4; funding for investment schemes, TAMS, pigs, poultry, sheep, fencing, handling facilities, dairy hygiene and water harvesting; the maintenance of forestry premia and provision of funding for forestry roads; and no increase in farmer levies or cuts in disease eradication schemes. Farm incomes have been directly hit in previous budgets by cuts in funding to farm schemes, including severe cuts in the disadvantaged area scheme, REPS, suckler cow welfare scheme, forestry and the suspension of installation aid and retirement schemes.

With regard to taxation, the IFA is aware of the commitment in the EU-IMF Memorandum of Understanding to reform capital gains tax, capital acquisitions tax and stamp duty by 2011. However, the reduction or removal of key farm taxation incentives would have the effect of reducing the productivity and growth potential of the agricultural sector.

The Government can facilitate improvements in the structure of farming through supportive taxation measures. The taxation system must impact equitably on all income earners and support improved competitiveness and efficiency at farm level. The IFA's taxation priorities include: no property tax on farmland or farm buildings; the retention of agricultural relief 90% rate and capital gains tax retirement relief for farm transfers; a reduction of stamp duty rates on farmland and the introduction of capital gains tax relief for farm consolidation; the retention of capital allowances for investment; and no additional carbon tax on agricultural diesel.

In the upcoming budget the Government must prioritise funding for the sectors that are growing and which have the potential to contribute further to economic growth. Agriculture is delivering through the increased output at farm level, tax revenues and food exports but it can only continue on this path if properly supported. I ask the committee to support agriculture in the upcoming budget through the maintenance of funding for farm schemes which are a critical support for farm incomes and production and the retention of key taxation reliefs to encourage farm transfers, land mobility and investment.

This committee must bear in mind one of the points I made which is that this economy needs confidence. Agriculture has led the way in investment and in confidence over the past year and a half. A badly thought-out budget which damages the schemes or puts penal tax on agriculture will affect confidence in agriculture.

Two of my colleagues who are national chairmen wish to make some brief comments if there is time.

Chairman

I will put that to the members. Is that agreed? Agreed.

Mr. John Bryan

Mr. James Kane is our farm business chairman and he will speak on taxation.

Chairman

I invite the speaker to come to the front. Who is speaking first?

Mr. James Kane

We are meeting all our targets in Food Harvest 2020. I refer to anything that might interfere with the transfer of land such as the agricultural reliefs and the retirement reliefs. At the moment there are no incentives. The installation aid scheme and the early retirement scheme have been abolished. The agricultural schools are overflowing with graduates with agricultural knowledge. If there is no provision for lifetime transfers, there is no way that these graduates will take over the family farm. Like the rest of the country, they will end up emigrating to Canada and New Zealand.

Age is a problem in that 25% of farmers are over the age of 65 and 7% are under 35. This is the reason we need to hold on to the few taxation incentives that exist. Any time we have been with the Department for Finance it has stated it is looking for equity. We have no problem in paying the household tax, just as everybody else does, but we cannot see why we should pay it on farmland or farm buildings.

There is a commitment in the programme for Government that there will be no increase in the carbon tax and we will look for the Government to honour that.

Mr. Tom Turley: I shall follow on from the statements of the president and Mr. Kane. The farm schemes are vital to farm income. As the president said, last year the average farm income was less than €18,000. No other sector is being asked to work the hours we work for that income. However, farmers are real too. They are prepared to work, and work hard, but the schemes must be left in place, in particular for the 13,000 farmers who have left REPS 3, some of whom received their last REPS cheque more than a year and a half ago. Unfortunately, farm assist numbers are growing and one can mirror this to the loss of the farm schemes. Let us face it - there are two ways of putting money into the rural economy, either through farm schemes or with the farmer’s “dole”, farm assist. We do not want that. Farmers are prepared to work. Our output is up.

We are sustaining and creating jobs and can do so for the future. Effectively, we are the goose laying the golden egg in terms of the economy. We need that goose to be nurtured, not choked. That is why it is vital to maintain the schemes, including REPS 4 in terms of the 30,000 farmers in place, and the disadvantaged area scheme. All these schemes have been hit drastically under the past regime. As to the current Government, the plan was for change and that is what farmers expect from this Government. However, they do not expect change in terms of the further continuation of cuts.

Equity is what we want. Agriculture, in effect, is being asked to take a 20% cut while other Departments are being asked to take 4%. That is neither equal nor equitable. Farmers are prepared to play their part, put their shoulders to the wheel and carry their can but they will not accept carrying the can for other sectors of society. With the income derived from our exports, we have shown we can create the additional money the Government needs badly to meet other costs. I will leave it at that - we cannot have any cuts in the schemes.

Mr. John Comer

I am deputising for our president, Mr. Jackie Cahill, who sends his apologies. Taxation is not my most natural brief but it is important for us to outline our points. Some of these will overlap with the IFA's points but I will be relatively brief because it is important for each organisation to express to committees what they believe to be important.

The agriculture and food sector is now viewed as important and indigenous. Currently it contributes significantly to the increase in exports and has untapped potential to increase this contribution. Furthermore it is now realised that export-led growth is the only way in which we can rebuild our economy in terms of size and sustainability. As these matters are now generally accepted, the issue is how the agrifood sector can be supported and allowed to grow to its full potential in the context of Government policy.

Taxation, by its nature, is a complex matter. Tax provisions were introduced in a rather broad-brush approach which had little regard to the consequent economic benefits or disadvantages or their impact on the tax base. We should now realise that the fine tuning of the tax system is an essential aspect and plays a critical role in this matter and the committee members, as legislators, are no doubt are aware of this. At our recent meetings with the Minister for Finance, the Minister indicated his full agreement in regard to the drafting of any tax measures so that we can get the maximum potential economic growth, in particular in the export-oriented sectors. I fully agree with this essential approach and emphasise its importance to the agricultural sector.

Based on the figures contained in the national recovery plan for 2012, it would seem that a figure of €220 million in additional carbon tax may be implemented in 2012. My colleagues and I met with the Taoiseach, then Deputy Kenny, in Charlestown on the eve of the general election when he was on his way back to his constituency. He gave us his assurance there would be no increase in carbon tax in regard to agricultural diesel. That was put into Fine Gael policy and its manifesto and I believe it is accepted by both parties in Government. As an association we believe it is critical this promise, as indicated, is delivered upon. As previous speakers noted, if we are going to be competitive in an export situation we cannot have taxes that are not present in other countries. We strongly recommend, therefore, that the commitment given by the Taoiseach that afternoon be put into practice.

In regard to stamp duty, I refer to our opening comments regarding the fine tuning of tax to take account of sectoral needs. A good example is furnished by looking at stamp duty relief on farm consolidation. It is self-evident that in order to meet our 2020 targets, and regarding availability of land, in particular land around the platform, everybody must be able to get land within reach of the milking parlour. The stamp duty relief that existed previously was not renewed in July which disappointed us. Based on the latest figures available from the CSO, the average number of parcels of land farmholdings is 3.5, with about two thirds of farmers having more than three land parcels. Fragmentation of holdings seems to be getting progressively worse. We do not want any more impediments to land consolidation put in place because that is key. It is critical for milk production for farmers to be able get land near the milking parlour. It is a very uncomplicated situation. All impediments put in the way of consolidation land around the milking platform, or block, as it is called, will have detrimental effects in terms of achieving the targets laid down.

Farmers are prepared to make every effort to achieve those targets but our policymakers must put in place proper situations and must row in behind us in practical terms. This would not be a huge cost to the Exchequer. I reiterate it is all about tweaking things. We are not here with a begging bowl. We understand the national position and the European situation and the overall economic context worldwide. We are only looking for practical sensible measures that do not cost an arm and a leg, but which would have real impact on the ground.

We are fully aware other capital taxes may be increased. I refer specifically to capital acquisitions tax and capital gains tax. Our specific proposal is that there should be no further reduction in the capital acquisition tax free threshold for gift or inheritance in budget 2012. It is crucial that agricultural relief be retained at 90%. We are fully aware that minor changes in this tax, or a series of such changes, can have a profound impact on dairy farmers and even on medium-sized dairy enterprises. I attached a table which shows that, for example, a reduction of the 90% relief to 75% could potentially make a transfer from father to son of a bill of up to €85,000. Previous speakers mentioned other ages but the actual average age of farmers in Ireland today is 58 years. If there is one thing policymakers should take from today's contributions from farm organisations it is that something must be done about that matter. The 2020 target will not be met by anyone aged in that bracket. I am not ageist, or any other "ist", but if farming is not driven from a youth base it will not succeed. We must put our heads together and get down the average age of farmers. It would not be a pragmatic approach to add any impediment to such land transfer or to require people to wait until they die to get away from taxes and the transfer of land.

The ICMSA believes it is crucial that the transfer of the triplicate farm family should not have any impediment with regard to capital gains tax and that roll-over relief should be introduced to allow for farm consolidation. This could be restricted to a specific time limit for reinvestment in agricultural property. In the event of an increase in the current capital gains tax as indicated in the national recovery plan the Government must reintroduce reliefs such as indexation and a general roll-over relief.

On income tax, the ICMSA supports the Commission on Taxation recommendation that earned income credit should be introduced for the self-employed and there should be equal status with the PAYE system. The ICMSA believes that farmers whose spouses take on a trade or profession that results in an income of up to €40,000 should be allowed to continue to avail of income averaging. This is critical and is a practical approach to the whole area of income averaging.

As to expenditure, disadvantaged area payments are very valuable and provide a direct income support throughout the country. The ICMSA is totally opposed to any further cuts in the disadvantaged area payments. The organisation is very concerned that the Minister for Agriculture may contemplate taking part of the single farm payment in order to fund the current suckler cow welfare scheme. This would be a most regressive move for the single farm payment and I would see it as reneging on the potential funding for that excellent scheme. It is a very good scheme. It could be funded from other sources. It would be nonsensical to take money from the single farm payment scheme before applying terms and conditions to it before give it back to farmers again. It would be a travesty of fair play. It should be withdrawn from consideration.

We suggest that provision should be made in the Estimates for the targeted agricultural modernisation schemes. A great deal of work has been carried out on farms. The schemes in question must be restored if people are to do what is required of them to expand and realise the untapped potential in this area. There is an appetite for the schemes. They need to be kickstarted.

We believe higher education grants should not be based on anything other than income. They should certainly not take account of assets, as that would be an unjust measure. They should be income-based only. I thank the committee for its attention. I could speak about other aspects of these issues, but I appreciate that we have time constraints. Perhaps other matters will arise. I will welcome any questions that are asked later.

Mr. Gabriel Gilmartin

We have to be as realistic as possible about what we want and about what is possible in the budget. It is essential that the budget be framed with an appreciation of the contribution the agri-food sector can make in terms of exports. There also needs to be an understanding of the contribution the farming sector has already made in terms of cutbacks. The dilemma that must be faced up to by the Government is twofold. First, how we achieve an adjustment of €12.4 billion over four years, involving €7.75 billion in spending cuts, in a fair and equitable manner? Second, how do we minimise the damage that cuts and higher taxes do to consumer confidence and spending power? Critically, how do we minimise the potential damage to the viability of businesses that can drive recovery? All enterprises which sustain jobs and add to economic activity are important when we talk about driving recovery. It should be self-evident that there needs to be additional urgency about supporting the viability and growth of export sectors. Foreign earnings are critical, clearly, regardless of whether they come from the export of livestock and food or from an increase in tourism.

The Government has regularly referred to the optimistic aspects of the Food Harvest 2020 report. Perhaps there is too much optimism in the report, in some respects. The report lays out a clear strategy to increase the value of agri-food exports to €12 billion, which would represent an increase of 42% on the average between 2007 and 2009. These targets are ambitious. The agri-food sector has shown a great ability to bounce back from difficult years, especially in 2009 and 2010, when there was an increase of 11% in agri-food exports. The increase for the first half of 2011 is estimated to be 14%.

The Irish Cattle and Sheep Farmers Association submission makes the case that farmers have already carried more than their fair share of the burden of cuts. The farm waste management scheme cost €430 million in 2008. There will be no such cost in 2012. The fallen animal scheme cost €26 million in 2008, but it will cost just €8 million in 2010. The disadvantaged areas scheme is costing €220 million at present, compared to €257 million before it was cut. The scheme is co-funded by the EU. Worst of all, the disastrous decision to close the rural environment protection scheme is gradually affecting more farmers as they exit REPS 3 and find their incomes are decimated. The replacement scheme - agri-environment options scheme - has been disastrous in terms of delivery, on-time payment and year-to-year certainty among farmers. We are calling on the Government to continue to fund new entrants to the scheme in 2012, but it is vital that people get paid on time. The overall cost of REPS - over €300 million per annum - was unacceptable to the Government. The reality is that the Government will eventually have to decide whether it wants to maximise the potential for EU funding for an agri-environment programme. The agri-environment options scheme will not do that.

When one examines the strategy for cuts, one has to ask hard questions. Where will we get answers from? The Minister for Agriculture, Fisheries and Food has referred the need to reduce gross voted expenditure in his Department in 2012 by €350 million compared to 2011. Even if we allow for the end of the farm waste management scheme and the phasing out of other schemes, the indication is still there that €200 million can be found. In our view, it is not possible to achieve further savings of €200 million in the Department's expenditure without seriously compromising the viability of Government support for farming and, in turn, undermining the Food Harvest 2020 plans. It is worse than that, however. Last week, the Government said its plan to reduce expenditure by €2.2 billion is the beginning of a four-year plan to reduce expenditure by €7.75 billion. The implication is that if agriculture keeps going at this rate, some €700 million will be taken from the agriculture voted expenditure over four years. This cannot be done at a time when the Croke Park agreement means that €20 billion in public sector pay remains immune from further cuts. We are not saying that the agreement should be thrown out - we are simply saying that farmers have a legitimate expectation to be treated on the same basis as public sector workers. If they are immune from further cuts, why are farmers not being treated likewise?

On taxation, the Irish Cattle and Sheep Farmers Association insists that no changes be made to the agricultural relief of 90% or to the capital gains tax relief for retiring farmers over the age of 55. An earned income tax credit should be introduced to replace the PAYE credit. There should be a long-term commitment to stock relief and land leasing. The capital gains roll-over relief should be restored. On pensions, we believe the Government is in danger of completely undermining the private sector provision for its own pensions. Self-employed people like farmers have been hit and are further threatened by regressive decisions which make pension provisions less attractive. The Irish Cattle and Sheep Farmers Association submits that the pension levy decision should be reversed and that tax relief on pension contributions should continue at a marginal rate, taking the universal social contribution into account. I will sum up by saying the Government has talked the talk, but it is now time for it to walk the walk.

Mr. Alan Jagoe

I thank the committee for the opportunity to attend this meeting. We will speak about issues of importance for young farmers in the upcoming budget. My presentation will relate to current budgetary and ongoing issues that are having a specific impact on young farmers. In general, I support my colleagues from other farm organisations who have raised issues and made proposals that are of importance to all farm businesses, regardless of their structure or the age profile of the farm business operator. I will concentrate on a select number of measures that Macra na Feirme views as vital if the budget is to support and encourage young farmers, who are the lifeblood and future of the industry. The focus of our pre-budget submission is on encouraging and supporting young farmers in agriculture.

The greatest challenge for Irish agriculture is structural change. The 2012 budget needs to further facilitate structural readjustment in primary agriculture in order to drive competitiveness and increase agricultural exports. The main structural barriers are the age profile of farmers and land mobility. The age profile of farmers has been mentioned already. According to the CSO, just 7% of farmers are under the age of 35, whereas 25% of them are over the age of 65. Demand for agricultural education is higher than it has been for decades. Greater numbers of qualified young farmers are seeking to start up in farming.

On the question of land mobility and access to land, the average farm has 3.5 different parcels of land, which creates huge inefficiencies. Sales account for just 5% of total land movement and consolidation of farms. Collaborative arrangements, such as farm partnerships, are underdeveloped and underutilised. The retention of land transfer tax reliefs in their current format is essential to curtail the reduction in the number of farmers under the age of 35 and to encourage the transfer of land to young farmers. Any changes to agricultural capital taxes under the EU-IMF review program must be resisted. A new measure is required to encourage young farmers under the age of 35 to restructure their holdings by means of sale and purchase without being liable for transfer taxes. The removal of barriers and the creation of incentives for collaborative arrangements among farmers, such as farm partnerships, is required to maximise land mobility.

A number of land transfer tax reliefs, including young farmers' stamp duty relief, agricultural relief and capital gains tax relief, are vital to young farmers. We need to encourage investment through stock relief and capital allowances. A new land restructuring relief is needed in the interests of land mobility. A specific recommendation in Food Harvest 2020 was that the Department should liaise with relevant Departments with a view to maintaining the current tax policy incentives to encourage the long-term development of agriculture, including agricultural relief, retirement relief, stamp duty relief, stock relief and long-term land leasing.

Macra na Feirme's proposal in regard to young farmers' stamp duty relief is that 100% stamp duty relief for young farmers be retained in the upcoming budget and that the revised Teagasc green certificate in agriculture meets the requirement for stamp duty relief for young trained farmers. Stamp duty relief for young trained farmers is vital in encouraging the early transfer of land to committed and progressive young trained farmers. Given that the relief is limited to young trained farmers under 35 years of age, it provides a clear incentive for transferring land before the applicant reaches the age of 35. This measure runs until 31 December 2012. We encourage the Government to extend it further.

In regard to capital acquisitions tax and agricultural relief, we propose the retention of agricultural relief in its current format of 90%. Reducing this percentage has the potential to have a negative effect on revenue for the economy as certain farms will not be transferred until death and the loss in economic activity of the farm not being transferred to younger farmers who generally increase output and efficiency would have an effect on economic growth in the agri-sector and revenue for our economy.

We also propose the retention of retirement relief in its current format of €3 million. Changes to this relief would further slow down the transfer of farms to young farmers. This would have a negative impact on the revenue for the economy as farms will not be transferred until death when no capital gains tax applies.

In terms of stock relief, we propose the 100% stamp duty relief for young trained farmers be retained in the upcoming budget. This is to maximise the economic contribution from young farmers. They need to quickly optimise their trading stock numbers and stock relief is designed to facilitate this. This measure runs until 31 December 2012. To facilitate investment by primary producers in stock, we need stock relief in place until 2020.

Capital allowances should be kept in their current format. A capital allowance is an allowance for the wear and tear of the asset. The allowance for capital expenditure is claimed on a straight line basis over a number of years. Farming is very capital intensive and young farmers taking over farms generally have to investment in capital expenditure to improve efficiency and expand the capacity of their enterprise.

We also propose a new relief, that is, a young farmer land restructuring relief. A specific recommendation in Food 2020 was that the Department should consider policy options to address increasing land fragmentation and that these would include support mechanisms to aid consolidation, such as the introduction of targeted roll-over relief for land sales. We propose the introduction of a young farmer land restructuring relief to allow young trained farmers to restructure their farm holdings without being liable for transfer taxes. New entrants and young trained farmers need to be facilitated through the tax system to establish farming systems and structures that are competitive and efficient.

Irish farms are fragmented and young farmers are best positioned to restructure their land base and should not be disadvantaged. According to the CSO, in 1991 the average number of parcels per farm was 1.9; it is now 3.5. This relief would also have a beneficial impact on the broader environment, including improving road safety, environmental economic benefits, improved land management and increased agricultural productivity and sustainability.

A number of ongoing issues are impacting on the start-up and development of farm business by young farmers. A recommendation from the mid-term review of Ireland's rural development programme was that greater measures were required to tackle structural issues and facilitate the mobility of land holdings in Irish agriculture. The evaluation made reference to the need to implement new models, including joint farming and partnership arrangements.

We broke them down into partnerships and targeted start-up supports for young farmers. Our proposal in regard to partnerships is that the Department remove any remaining obstacles to partnerships - for example, treating individuals separately in partnerships for accessing schemes, disadvantage area payments and modulation under the single farm payment. We also propose the introduction of incentives for partnerships, such as a 100% stock relief for four years for registered partnerships. This would allow the partnership to avail of 100% relief provided one of the parties in the partnership is a young trained farmer under 35 of years of age. The establishment of a body that would assist with the promotion and development of collaborative arrangements among farmers needs to be explored.

To encourage farmers to form farm partnerships, it is important to remove obstacles and restrictions on farmers involved in partnerships. Farm partnerships can achieve huge benefits for farmers, including sharing experience, efficiency, increased borrowing and spending capacity and a much improved lifestyle.

Macra na Feirme believes that a special stock relief provision for partnerships would encourage more farmers to consider this option. This would act as an incentive for older farmers to consider forming partnerships with young farmers and thus make more land available and improve the competitiveness and the adoption of new technologies on farm. The family farm model is highly efficient and needs to be facilitated by collaborative arrangements such as partnerships.

A specific recommendation in Food Harvest 2020 was that the Department should target all future schemes and supports, which have limited funding, at those producers with best potential for growth and competitiveness and especially at younger farmers with relevant qualifications and sound business plans. We propose that the limited funding available for agricultural schemes needs to be prioritised and targeted at supporting young farmers to start up and develop their farm business.

The single farm payment national reserve needs adequate resources to support trained new entrants to agriculture who are without a single farm payment and the immediate reopening of these co-funded schemes, including the dairy equipment, water harvesting, sheep fencing and pig and poultry welfare schemes, is required.

Food Harvest 2020 outlined ambitious but achievable targets. As young farmers, we are the future and the lifeblood of the industry. We need budget 2012 to support us today but also to help us to reach 2020 and beyond.

Chairman

For some reason, the name plates are not working but the witnesses names have been circulated. If people's telephones are switched on, I ask that they turn them off because it has implications. The broadcasting unit is having a nightmare with telephones. I did not mention that to the witnesses, which is probably my fault.

Deputy Michael Moynihan

I thank the ICMSA, the IFA, the ICSA and Macre na Feirme for the forthright way in which they put their proposals. The goose that laid the golden egg was referred to and agriculture is the industry which is doing well at the moment. There is huge potential in agriculture. Food Harvest 2020 outlined where agriculture can grow and how it can become a driving force in the economy going forward.

The delegates raised a number of issues which they want to discuss with us as we face budget 2012. The issues include the schemes they want to protect and which have benefited agriculture enormously. A number of schemes, in particular the disadvantaged area and the suckler cow schemes are vitally important, as is AEOS. There were huge cuts in 2008 but not as many in 2009 and 2010. My party has paid an enormous political price in regard to them. We see the difficulties in peripheral regions where there is a social aspect to agriculture as well and these schemes must be maintained.

All the delegates were in agreement in regard to taxation. There is a fear in regard to taxation changes which would, in some way, stop the transfer of land from one generation to the next. There is a huge issue in regard to land mobility and young people getting into agriculture. As we have seen, with the increased uptake of places on agricultural courses, the capacity of the colleges has been stretched for the first time in a long time. Land transfers are a significant factor in land mobility. Taxation is a major issue. When the older generation consider making a decision, the first thing they do is to go to their solicitor or accountant and have them calculate the cost to the family unit of transferring the land. That is outside the decisions on family settlements. There is an onus on everybody on this committee, the members of the Oireachtas and the Government to ensure the taxation regime will not hamper developments in agriculture.

We have seen exports rise from €7.2 billion to close on €9 billion. The cost of the product has increased significantly on the world market, which has benefited agriculture which was at a very low base in 2009, when many on family farms were at the pin of their collar to survive. The volume of product must be increased significantly. As we have seen from statistics on the rise in world population, there is a high demand for agricultural products and it behoves us to increase the volume of production. The IFA delegation referred to our grass based product which means we produce a green product. We need to enter the emerging markets over the next number of years.

We have benefited from the increased price for agricultural products but we need to increase the volume of production. People have expressed concern about the suggestion that there may be a reduction in the single farm payment and the ICMSA signalled its concern about taking part of the single farm payment in order to fund the current suckler cow welfare scheme. One issue that every farmer I meet raises is the cost of regulation of the industry. The number of officials visiting the farm is an issue. There are on-farm inspections but if a farmer has an animal with TB or any disease, five or six or more inspectors will come to a farm in the one week and they are all travelling from the same base. When the Department is considering ways of reducing expenditure, it considers the schemes which provide a significant income support for our farmers.

There is a requirement to be meticulous about the cost of regulation, not just to the industry but the amount of money involved. We must ensure that there is no duplication. Every farmer will tell their public representatives that there is widespread duplication in regard to regulation. If cuts are to be made, we must ensure that in the first instance the Department considers the level of duplication.

Agriculture is at a major crossroads. The CAP negotiations have begun and legislative proposals were launched on 12 October. Debate will continue through 2012 and on into 2013. There are major decisions to be made to ensure the future viability of Irish agriculture is at the forefront. We must recognise that the major issues are first, to protect the direct funding to the farmer and second, to ensure that the taxation regime will not penalise people for wanting to attract young people into agriculture. Property taxation must be on residences and not on land, which is the basis of the industry and must be worked to make an income.

I welcome the delegations from the IFA, ICMSA, ICSA and Macra na Feirme. It is good to see them here. All these organisations are making an enormous contribution to Irish agriculture and represent farmers at the farm gate at every possible opportunity.

Deputy Michael Colreavy

I thank the spokespersons from the IFA, ICMSA, ICSA and Macra na Feirme. The presentations were professional and interesting. They gave us good information on what needs to be taken into consideration when choices are being made about budgets. It is clear that each of the organisations recognise that this is a difficult economic period for the country and that the Government and Opposition face challenges in trying to get things right. I was also impressed that the four organisations could reach broad agreement on many areas of the budget proposals in spite of having different perspectives. Members on all sides would support their budget proposals.

A key factor I have identified is Food Harvest 2020, a document that was prepared by the previous Government which sets out ambitious targets for the development of agriculture. The progress on meeting those targets are now being monitored throughout the year but if we are to be credible in achieving the targets of Food Harvest 2020, we will be judged on the choices we make in the budget. We cannot claim we are trying to meet these targets if we are making certain budgetary choices. It can be a blueprint for economic development in agriculture and food production or a fairy tale, where we set out the targets that we then actively set out to block.

I do not believe that agriculture can take the level of cuts that are being discussed in the Department of Agriculture, Food and the Marine. If such a level of cuts is introduced, we must look again at Food Harvest 2020. We cannot do both. We cannot have ambitious targets and tie the hands of the very people we are entrusting to meet them.

From the point of view of the Sinn Féin Party we will be looking for fairness and equity across the range of services. There is the interesting perspective that for every €1 spent, there is a return of almost €2 to the economy. We cannot overlook that and undermine and pay lip-service to the targets that were set for agriculture. We all face that challenge. I will be fighting to secure funding for agriculture and to ensure that budgetary decisions will not damage the industry. We should allow the industry to grow and improve. It is possible to make many improvements that are not necessarily budget dependent. Often what is needed is a willingness to think in a slightly different way about how services can be organised and how the Department of Agriculture, Food and Marine can be organised. I will certainly be looking at those areas.

There is little or nothing in any of the submissions with which I would take issue. I am a realist and I understand the Government has difficult choices to make. We will certainly be pushing that those choices should reflect that Food Harvest 2020 represents a challenge we should achieve and not something to which we pay lip service.

Deputy Mattie McGrath

I welcome the four groups and thank them for their submission. It is great to have them all here together even though we have time constraints today. I thank them and compliment them on their submissions and all their hard work on behalf of their members. While it is nice and cosy to talk about the good times in agriculture, the preceding years were poor and it is important to put that into context. I will insist as best I can that we should maintain the existing schemes. While I am not anti-regulation, over-regulation is a major issue. I am opposed to overzealous regulation and too many regulators. This Department has chopped schemes but has failed to look at itself. While I am not anti-official, there are too many of them in the Department of Agriculture, Food and Marine. Addressing that issue is a priority for me. I support 95% of what is contained in the submissions and I look forward to working with the groups both before and after the budget.

Deputy Martin Heydon

I thank all the groups for their presentations. I come from a rural background as nearly all the members here do. In some way the witnesses are preaching to the converted as there is an acceptance among committee members as to the value of agriculture to our rural communities and to the economy overall. I agree that the funding allocation outlined in the National Recovery Plan 2011-2014, agreed by the previous Government is not acceptable as cuts in agriculture exceed those in other Departments. The challenge facing the Minister, Deputy Coveney, is that any gains he might make will have a negative impact on another Minister at the Cabinet table because the headline figure cannot change. However, we need to fight for that because agriculture has the potential to drive on the economy. Bearing in mind the country's difficult financial circumstances and the challenges before us, I would be interested to hear any suggestions the organisations might have to provide tangible savings while impacting least on production in the rural economy.

Deputy Noel Harrington

I also welcome the four main farming representative groups. We have read their submissions and have also been listening to individual farmers and local organisations for the past four weeks or more. All the organisations have stated they recognise that tough economic challenges are coming down the track. The budget will not be easy on anybody in any sector of the economy. The Government must ensure that any cuts are applied fairly, equitably and with as much trust as we can. The agriculture Vote with which we will soon be confronted will take a major hit of perhaps 20%, depending on the treatment of the single farm payment. However, the reality is that is a severe cut and is greater than the cuts in other Departments, which is a challenge.

Even though the majority of the submissions we have heard are similar in terms of recommendations on the fiscal side, including capital gains taxation, and recommendations on the farm schemes, there are obviously differences between the organisations. Within that we are trying to achieve equity particularly for farmers who might have fewer options than other farmers. That will be challenging for the Department, the organisations and the individual farmers. We are trying to maintain the equity nationally down to equity within the agricultural sector. From previous discussions we have had with the organisations, we are aware that that will be quite a balancing act to achieve. There are more vulnerable people whom we must look after and that needs to be recognised in our deliberations.

Senator Michael Comiskey

I join my colleagues in welcoming the four organisations. It is great to have them all together as we are all interested in farming and want to see farming continue to make the progress it has made in the past six or eight months. The IFA president said that a cattle mart is a good place for confidence at the moment, with which I agree. The mood among farmers is very upbeat and if we are able to continue that in the coming years, we will certainly cross the threshold of 300,000 jobs.

In recent months we have met representatives of the IFA here in the House. I have met many farmers' organisations where I live. At every mart I attend when I am home at the weekends, I meet farmers and get to hear the problems. We have seen the disadvantaged area scheme cut in recent years. REPS 3 is almost finished and only a few farmers are in REPS 4, which is a major loss to farmers. The suckler cow scheme payment was reduced from €80 to €40, which was another major scheme. If we could extend that scheme and increase our suckler herd, we certainly would create more jobs in the industry. We want to see more done to look after the young farmers. While the CAP proposals have something for younger farmers, it should also have something for the older farmer who wants to hand over the farm to the younger farmer. Far too many older farmers are continuing to try to hold on to their single payments and their farms and are not in a position to hand over to the younger farmers, which needs to change.

We are realists and realise we are in a difficult situation. While my colleagues and I will do everything we can to ensure that the budget minimises cuts to the farming community, we have no idea where the axe will fall. We will be working to do whatever we can and will keep in touch with the farm organisations and keep farmers on the ground briefed as to what is happening. I thank the representatives of the organisations for attending and we look forward to working with them in coming years.

Chairman

As there have been very few questions, I will just allow the remaining members make their contributions at this stage.

Deputy Pat Deering

I welcome the delegations from the different organisations. It is a unique occasion having representatives of the four organisations present together. As we all know there is considerable confidence in agriculture at the moment. Reference has been made to cattle marts and as one who has regularly attended cattle marts in recent weeks, I recognise we need to be careful in that regard. There is more confidence for sellers than for buyers at the moment. We need to be careful we do not create a bubble as we have had in other sectors which ended acrimoniously. I may be slightly conservative in this regard, but if we create this bubble we must be careful not to go overboard. My fear is that next spring, after a reasonably good winter and a good year in 2011, farmers might be shooting each other in the head and paying over the top for conacre, whether for grass or tillage. That is a dangerous road and we must be very careful in that regard.

One of the biggest current problems in agriculture is the cost of inputs. Some are out of our control but some are within our control, including one I would like to mention. I welcome the submissions made by the witnesses. No one in this room would disagree with anything contained in the submissions. We all come from agricultural backgrounds and we know what the situation is. The issue of young farmers was mentioned in all the submissions. We must encourage more farmers back into the system, especially as we approach the new CAP negotiations and Food Harvest 2020.

Those three issues are inextricably linked to one another. Although it is nine years away, Harvest 2020 will not be long coming. A farmer who is 60 years old today will, most likely, want to get out of farming by 2020. He and the person who will inherit his farm must get encouragement to go along the same way as in the past. We must encourage them as much as possible. Some system or scheme must be in place, perhaps following the new CAP negotiations, to encourage them.

No one would disagree that agriculture is the real driver of the economy at present. However, we must be realistic. We are in difficult times and we must make the best of what we have. Whatever budgetary constraints we face, there must be fairness and equality within the system. It is important that we work together within our various groups. Various organisations have held meetings with one another in recent weeks and months. It is important that we liaise on an ongoing basis so as to achieve the best possible solutions and outcomes for farmers.

Deputy John O’Mahony

I have no questions. I checked before I came to the meeting and I think this is my 15th meeting with farm organisations at branch, regional and national level and the fifth in the last two days. When I say I have no questions I mean to compliment the organisations. Public representatives cannot say the organisations did not give us sufficient information regarding their targets and ambitions for farming, which we all share.

I agree with Deputy Harrington regarding the challenge facing all farming organisations, political parties and the Government. The cake must be shared equally. Those of us who are on the political side of things represent particular areas of the country that have particular issues and problems. As we go forward from the budget and the CAP proposals we must get the tweaking right in supporting very productive farmers and those farmers who are restricted and need compensation for the restrictions that have been imposed on them.

The challenge for the country is huge but it is particularly huge for the people in this room, on every side. I look forward to working with my colleagues on all sides in trying to get that balance right in the coming weeks and, as the CAP proposals come up, the coming years.

Senator Mary Ann O’Brien

I have one general question for the four organisations. I was surprised that no one mentioned giant retailers. I see four sets of stakeholders in this industry. First, there are farmers, producers and suppliers. Second, there is the Government. The third group of stakeholders are retailers and the fourth are consumers. Consumers are doing well. The price of food has come down. The Government is not doing so well. We all know that. Farmers are doing okay, but the goal of Food Harvest 2020 is facing us and we all want to achieve it.

The fourth crowd are doing extremely well and have no problems. They are the retailers. I will not mention any names, but at the beginning of October one giant retailer announced pre-tax profits of approximately €1.9 billion. I will not mention any names because I do not want to be rude. If the average farmer's wage is €18,000 the average wage of a young supermarket buyer of around 29 or 30 years of age is at least 2.5 times the wage of a farmer, plus a company car and other perks.

I ask farming organisations and the Government to bring the retailers to this party, so that they start to pay their fair share and help us to keep agriculture on target for 2020.

Senator Pat O’Neill

I apologise to the organisations for coming late to the meeting. I will read through their presentations.

There is a general confidence in agriculture at present but consolidation is most important. One swallow does not make a summer. Farmers have come through the years 2007 to 2009, whether in sheep, beef, tillage or dairy. Other Deputies and Senators have pointed out that agriculture may be going well but that gives a false impression. We are coming from a very low base. Furthermore, costs have risen. Fertiliser, fuel and other costs are being driven up constantly. When merchants, oil companies or other suppliers see agriculture going well they increase their take. That is unfortunate.

I would like to hear the views of the organisations on a point made by Deputy Heydon. We are all actively involved either in farming or in rural Ireland and we know where savings can be made. I will not point out anything here. I know there is waste in the Department of Agriculture, Food and the Marine. I mean no disrespect to civil servants in the Department when I say this. They will be told to cut a budget and where to cut it. However, many of them do not understand rural Ireland and its costs. I do not wish anyone to be identified, but I would be interested to hear the views of the organisations as to where savings could be made.

With regard to Harvest 2020, we do not want to be pressurised into achieving certain figures. The goals of Harvest 2020 must be achieved in a manner that is respectful to the environment, to the people who work the land and to everyone involved in agriculture. With the abolition of quotas in 2015 we do not want to see everyone drifting into the dairy industry and ignoring, for example, the suckler herd, which is basic to Irish agriculture, or the sheep industry. It would not be good if, because dairying is going well we all suddenly get into dairying. I accept that costs may not allow that because money will not be available.

We must support young farmers. We must try to control costs in agriculture because they are spiralling. We must also support active farmers. If older people want to get out of agriculture we must put schemes in place to encourage them to exit by making it beneficial for them to do so in a comfortable manner. Farmers should not be driven to hold onto land for the sake of maintaining farm payments. Young people are the vibrant part of any industry. We must encourage young people into agriculture.

In recent weeks, I have read much scaremongering in the newspapers about what the Department is going to do. We must be proactive. There will have to be cuts because the country is in an economic mess. If we are to achieve the goals of Harvest 2020 the cuts should be made in a way that will support younger active farmers who will help the industry grow. I would support such cuts. Like Deputy Heydon I would like to hear from the four organisations where they think savings can be made.

Chairman

I thank all members for their contributions. I will quickly go to each witness. With the agreement of the committee I will start with Mr. Dolan because he did not get a chance earlier. He wanted to make a comment.

Mr. Ciaran Dolan

I am pleasantly surprised by the comments of Deputies and Senators. For a long time our sector has been ignored and then treated in a casual way in terms of policy. I am representing farmers for 30 years and never before was there such a need for critical analysis, be it on the question of a bubble in the beef sector or other areas. However, the required critical analysis is not available. How could the State have allowed the situation to arise where we are in our 12th year without a professor of agricultural economics? Let us think about that, given that the country is dependent on agriculture to some extent for its survival. In his latest press release the Minister for Finance said the likelihood is that exports will remain the only significant source of positive momentum in the economy in the next couple of years. That being the case, safeguarding and expanding the economy's export base would clearly be a critically important objective for the whole economic strategy. Apart from the work that is done by the farm organisations, with a number of notable exceptions, academia has not delivered. With a few notable exceptions in the Civil Service we have not carried out the analysis that is required prior to determining policy and following its implementation. I stand over that. We have written to the president of University College Dublin, UCD, and asked him to please appoint a professor of agricultural economics and set up a world class department of agricultural economics in UCD so that the sector and the general public can be informed of developments, not just on domestic policy in this country but how we meet the new challenge in terms of what lies ahead.

Deputy Moynihan and others referred to costs. There are two aspects to the matter arising from legislation. At one stage one could hand in one's deeds or land certificate into one's friendly bank manager and one got a loan. The Oireachtas brought about electronic conveyancing. It now costs approximately €1,500 to give security. We have a banking sector whereby all banks registered in this country are now in State ownership yet we do not have a single table that will give farmers information about the real cost of credit in this country vis-à-vis our colleagues in other countries. It is a simple matter which we have raised with the Department of Finance, the Central Bank and the regulator but we have received no response.

Many issues arise in terms of costs. It may have been Deputy Mattie McGrath who referred to the cost of regulation. We need to critically analyse information in order to make policy. We face the prospect of food prices increasing - a reversal of 100 years of declining prices. Do we have the wherewithal in this country to ensure that the cost of inputs increases at a lower rate than our competitors? That will require a lot of work. The question is put to us of what aspects of the €200 million would we say cost the least. It is an unfair question to us but it is an important one. That issue should be addressed by the committee and other bodies in terms of a critical analysis of the proposals prior to them being implemented. We should move away from a situation where in the past we had the luxury of a broad assessment of issues.

Deputy O'Mahony spoke about tweaking the system, both in terms of schemes and taxation. We must do that because we have no alternative. We have a complex sector and we lack critical analysis. That is my third time to say it. That does not mean that the resources do not exist. They do, but we are not getting the required output.

Mr. John Bryan

I will try to be brief but I will go through the questions asked by each member. In reply to Deputy Moynihan, the most important issue that must be borne in mind by the Government is that the agriculture sector can deliver. It has proven that in the past two years. I will respond to questions asked by others later. The capacity of agriculture to create jobs and grow exports has been proven in the past two years. A bad budget has the capacity to undermine that. Reference was made to the budget in 2008. One can see the damage it did to agricultural confidence. People slaughtered cows. At the time people stopped going to marts. The Government must give leadership and be careful about the decisions made. That is why it is unfortunate that a few people had to go who said they would deal with cuts. The short-sightedness of making cuts to the most productive sector in the economy is lacking in initiative. The Government must think hard about what happened in 2008, both the damage it did to the economy and all the seats that were lost associated with it. That should be very much borne in mind.

Consumers had the cheapest food they have ever had. In the 1950s it cost people more than 50% or 60% of the weekly budget to pay for food. In the 1980s it was 30%. Today it costs less than 10%. We are an exporting country. People have asked if there is a bubble. The reality is that food was being given away and was devalued for a long time. There is capacity at world level for food prices to grow. It was mentioned that we must grow volumes as well as costs. That will happen. If it pays a farmer to do a job, he will do it, but he will not do it when it is below the cost of production. A vital point was made about the protection of the schemes. The less-favoured areas, LFAs, the suckler cow welfare scheme, the rural environment protection scheme, REPS, forestry and other schemes are essential. Low farm income can undermine rural areas as the money is dispersed in every county. We have Deputies here from everywhere. Some of the changes that were proposed by the Commission on Taxation would not gain a penny for farmers because of the rule that was mentioned by several members. If I had to pay €200,000 or €250,000 to hand over my farm I would not do it until the day I died. That is counter-productive.

I agree with Deputy Colreavy that we are in a different economic situation but Food Harvest 2020 is very achievable. It is not just a piece of paper to be thrown on the shelf. I welcome the fact that it was introduced by the previous Government and the Department of Agriculture, Food and the Marine and the new Minister looked at it and decided it was a sensible plan. This is the first real test. The budget will decide whether it is lip service or genuine. The previous Government saw the damage it did in 2008 and did not repeat it in 2009 and 2010. It is important for a Government which has hard decisions to make to take into account the importance of jobs and exports.

Agriculture cannot take the cuts. That comes back to some of the points which I will get to in more detail in a few minutes. Every Deputy received a copy of the report we got UCD to produce during the summer. They should have read it. The positives are that for every euro we almost create two euro of activity. In the case of the domestic budget, nearly 50 cent of the euro comes from Brussels so for 50 cent one is getting four to one. There is also another chapter in the report about the effect of cuts. They would be more than two to one. Members should bear that in mind.

I agree with Deputy Mattie McGrath. We must protect the schemes. I am one of the most positive people one could meet. I believe agriculture has a massive contribution to make but one should never take one's eye off the fact that agricultural incomes are €18,000. It was mentioned that when REPS 3 ran out several farmers lost €7,000 to €8,000. We must have an AEOS scheme but a substantially lesser scheme. One must protect it. Again, I agree with the comment that we must address over-regulation and paperwork - anything that can reduce costs. The Department should take a hard look at it. Paperwork takes up a lot of time. Anything that is time consuming is expensive. Unannounced inspections are totally unacceptable and put a huge cost on people.

I welcome Deputy Heydon's comment that the allocation was not adequate. Considering the savage cuts in the capital budget, it is not possible to live within such limits. Members asked where the cut should be made but if we make cuts to agriculture, the cost to the economy will be greater. If we are to meet the growth targets set out by the IMF and others, we only have one hope. The savage cuts proposed for the next four budgets are based on certain growth rates but if we undermine agricultural production, the growth targets will not be hit, resulting in damaged confidence. Confidence is very important and there would be a small spend to protect agriculture.

At this stage schemes have been so well pared down there is not much money left, although there is co-funding from Brussels. The damage done to agriculture and the wider economy will be greater if cuts are made. We should bear in mind that the Minister for Finance this week quoted a figure of €3.8 billion for adjustment in the budget, which rose from €3.6 billion because of a drop in growth rates. Were it not for growth in agriculture, that figure would be higher. If a Government makes a decision damaging agriculture, the adjustment figure will grow and there will be greater cuts over the next four years. It is important to bear that in mind.

Deputy Harrington mentioned cuts being fair and equitable. I know this is not easy but the report from UCD involved two professors and clearly set out its points. The IFA has also put a proposal for funding to put in place a professor of economics, which would be vital. We are willing to make a substantial contribution to that. It is important for people to study the report produced by UCD because of the very hard decisions which members must make and the advice the committee will give to the Ministers responsible for finance and agriculture. That is the reason we went to the expense this year of producing that report. The UCD report is helpful and independent, although it does not share our views entirely. Everybody knows our view.

One cannot capture positivity. When we see the events in Greece on the television, who wants to be there? There are people breaking windows and knocking the place down. Half of the world is afraid to invest in the country. We want Ireland to be open and the country in which people will invest. This is a place for jobs and exports. We could try to bottle the small bit of positivity coming from agriculture, as I know that as with the weather, everything changes. I have been farming since 1980 and agriculture was respected then. The wheel has swung against us for a few years and there was a point during the Celtic tiger when nobody wanted us. The wheel is turning again and agriculture is being appreciated again, and not just in Ireland.

It is appreciated by the Food and Agriculture Organisation, which has argued that we must produce more food to feed 7 billion people. The EU is thinking again about the sector at a budgetary level. If we had the CAP debate three years ago it would have been much tougher, although it will still be long and arduous. We must bear in mind the value of positivity. Agriculture is a significant employer. If agriculture was taken out of Leitrim, for example, by damaging the suckler herd, what would be left? It does not matter whether the sector is active in west Cork, south Tipperary or Kildare, the contribution that agriculture makes to the economy should be remembered, especially as confidence is so important.

Deputy Deering mentioned confidence in cattle markets. We had a construction bubble but cattle and dairy prices have been depressed for a long time. The prices in 2009 were not realistic and today's prices are closer to reality. Dairy is at 34 cent per litre and beef is above €4 per kilo, and that is where we must be to cover the high costs of feed and fertiliser. The Government has a duty to every person in the country and the agricultural sector to not damage the existing confidence. People are buying good heifers to put in calf again and the sheep flock has stabilised. There were times when heifers were not being put in calf, farmers were not putting a ram with a sheep and dairy production was being reduced, in 2009 that sector was 11% under quota. We must think of the duty we have to jobs and exports. We must do everything to get young farmers into the sector. If the tax-neutral system is tampered with, the Government will not take in an extra penny in tax but the sector will be affected, which will be bad for the country's targets. A carbon tax should not be put on agricultural diesel.

Deputy O'Mahony comes from a part of the country where farm income is at quite a low level and brings much pressure on farmers. The cuts in 2008 were savage and there is no more room for such cuts. A hill farmer in Mayo or Deputy Deering's country on the border of Wicklow and Carlow is living a tough life, and no more cuts should be imposed. Jobs and exports remain important. Every euro spent on agriculture creates €2 in the economy, and that point must be made repeatedly.

Senator O'Brien had to leave but we addressed the Chairman several times on the issue of retailers. Today's discussion is about what the Government can do with regard to taxation and schemes in the budget but we have met the Minister responsible for trade several times to discuss issues relating to retailers. I would like to see the introduction of retail regulation and we need a serious change in the competition laws in Ireland.

Senator Pat O'Neill is a neighbour and I speak with him often. I do not accept any cuts and agriculture has much to contribute. It is a low-profit sector and the Senator asked about the 2020 report targets. I have no doubt that we can meet them. Dairy quotas will go in 2015 and the markets will still exist. A couple of years ago our beef figure for Germany was 200 tonnes but last year it was 7,000 tonnes and we are over 11,000 tonnes already this year. The markets are there and we have a very sustainable product. Very few countries in the world have our skill set, with very educated farmers. This is not the slave labour that operates in some ways in South America. The people are well trained and have skills. We have spent a fortune investing in infrastructure over the past few years and there are existing markets. We have sustainable grassland and water sources. Every euro spent in agriculture gives €2 back and confidence will be necessary to boost the economy.

Mr. Pat Smith

I spoke to 650 women from farming families two weeks ago. School bus charges have increased and there will be a septic tank charge, along with a universal social charge and residential property charges. The farming community and its families must deal with these. We are looking to the Government to ensure farmers will not be hit on the double, which is the key message in the context of reducing farm schemes.

In 2008, the last time we saw serious hits, there were 4,000 more people in receipt of farm assist as a consequence. If the money is put into the rural economy through farming schemes, that economy will see a benefit. The farmer does not hold on to money and mixes it into the economy. There is a benefit. It is up to the Government to ensure the farming community is not hit on the double and that there is equity in its actions. With regard to taxation, I reiterate the significant benefit to be gained from some of the proposals set out in the pre-budget submissions. If these are knocked back, there will be little benefit but much negativity.

Some members referred to competitiveness and we must reduce bureaucracy. There should be no extra costs put on what is a very competitive sector.

Mr. Eddie Punch

Last month the Minister, Deputy Coveney, came in here and indicated that he wanted to go from €1.64 billion in gross voted expenditure for the Department to €1.28 billion, amounting to over €350 million of a difference. Some of that will occur naturally because of the ending of schemes like the farm waste management scheme and so on but he is still looking to cut more than €200 million. Last week the Government announced its four-year plans for complying with the targets to get the deficit down by 2015. Up to €7.75 billion of spending cuts will be achieved over the next four years, €2.2 billion of which will happen in the forthcoming budget. The contribution of the Department of Agriculture, Food and the Marine to this year's adjustment will be €350 million, which amounts to over 16% of all cuts. From this, one would expect that the Department has 16% of the total gross voted expenditure of all Departments. It does not. For 2011, total expenditure came to €57.5 billion, from which the Department of Agriculture, Food and the Marine took €1.64 billion, less than 3%. All members must take this back to their respective parties and also ask the Minister if is he happy with this.

How can we explain the Department of Agriculture, Food and the Marine is expected to fund so much of these €2.2 billion in expenditure cuts? This is anomalous to what is being done in other Departments. This committee must get to grips with the one question, why is the Department of Agriculture, Food and the Marine disproportionately way out of line with what is being done elsewhere.

Some of the €350 million savings have already happened with the ending of farm waste management schemes and so on. The current voted expenditure for the Department in 2011 was set at €1.37 billion. However, significant appropriations-in-aid, such as moneys that came back from co-funding in Europe, affect this figure and the net current expenditure is approximately €1 billion. The actual cuts, accordingly, will amount to a 20% decimation of the Department's budget.

We are not saying the Croke Park agreement should be thrown out. However, the dilemma is how can there be no cuts in the €20 billion public sector pay bill or in social welfare. How can this level of adjustment be achieved when we rule out the three big areas of expenditure - health, public sector pay and social welfare? How can we get €350 million in savings from the Department out of the residue? It cannot be done. These are the questions we want Deputies and Senators to face up to.

Where can savings be made? Improvements have been made in disease levels which will produce some savings. More can be done in dealing with general inefficiencies. The kind of nonsense of five officials all attending a farm with a TB outbreak needs to be stopped. The small areas of expenditure such as the world food programme - €9 million - or the horse and greyhound fund - €57 million - could also be targeted. However, this is not what we would advocate.

In the end, the key question is not what can the Department of Agriculture, Food and the Marine do but why is it being asked to make a contribution of €350 million which comes to 16% of all cuts. If this continues with the budgetary adjustments over the next four years, the Department of Agriculture, Food and the Marine will have suffered cuts of over €700 million. It is nonsensical. The hard decisions have to be made in the big spending Departments, not the small spenders like the Department of Agriculture, Food and the Marine. Going after the small spenders leads to nonsensical ideas such as foregoing some of the co-funding from Europe or the outrageous idea of eating into the single farm payment. These have to be consigned to the scrapheap and we need to go back to first principles. The contribution of the Department of Agriculture, Food and the Marine should be pro rata with expenditure cuts in other Departments.

Farmers have done much in making savings in costs. Questions must be asked, however, about carbon tax, ESB costs and so on, areas in which the Government has influence. If the Government makes the decisions it is indicating, it will drive up costs.

Mr. Alan Jagoe

Just over a year ago, at the Macra na Feirme annual conference in Wicklow, there was a lengthy discussion about the Food Harvest 2020 strategy. While it was generally welcomed, one fault of the report was it did not contain any references to retailers. Macra na Feirme flagged that one year ago. It is disappointing nothing has been done about it since.

Yesterday, as leader of Macra na Feirme, I addressed 130 students at Kildalton agricultural college, all of whom are looking forward to a career in farming. The one message they wanted me to give to the committee today was that reliefs for young farmers, such as stamp duty relief, stock relief and capital allowances relief, must be left alone. A young farmer handed a significant tax bill from the outset when taking over a farm will not be able to continue. It is like trying to swim one-handed upstream. Young farmers need the support of the Government.

Mr. Gabriel Gilmartin

On the point about how savings can be made, the average single farm payment in Ireland is approximately €10,000. In County Leitrim, it is less than €5,000. What is the justification of having one week spent by five agricultural inspectors inspecting a farmer in Leitrim on less than €5,000? This has happened on many occasions since last September. Some of the farmers affected have not received a single farm payment or a disadvantaged area payment because their lands are being digitised. The Department of Agriculture, Food and the Marine, however, has requested them to return €130 because of overpayments in the grasslands scheme for last year. These are two examples of total waste in the Department.

Mr. John Comer

I will not go back over old ground but we were asked where we saw savings. It is not a fair question to ask farming organisations, only to say that any taxation on the transfer of land and so on that will impact on farmers would be regressive taxation. The obvious area for savings is in administration in the Department, such as cutting out the duplication of inspections.

I am not as confident as the other farming organisations that the targets set out in Food Harvest 2020 will be achieved. The strategy has to be led by the Department of Finance which must not put any obstacles in its way. It must be remembered that Ireland is just one island on the periphery of Europe and it does not have any monopoly on production. When deregulation takes effect the floodgates may open across Europe.

I am not knocking agriculture or playing anything down but we have been caught in a property bubble and, as others noted, we also had a commodity bubble. It is possible that the plans in place will not work out. I do not want to lead farmers blindly into borrowing money to establish an enterprise that could go belly up in 2015 when the floodgates open. I am merely adding a caveat to counter all the hype. I am not playing down the potential but adding a note of realism. My advice to all farmers I meet who are about to go into debt to restructure their holdings is to make haste slowly and ensure they do not invest on their own because the Government must lead by investing in agriculture.

The cost of borrowing was raised. It is essential that we know where we stand in this regard. Irish farmers have total borrowings of almost €6 billion. If the interest rate we are charged is 1% higher than that paid by our competitors elsewhere in Europe, the additional cost to Irish farmers will be between €50 million and €60 million per annum. We must get a handle on the interest rates we pay compared with those paid by our counterparts elsewhere in Europe. We must structure loan facilities and credit in a manner that is competitive vis-à-vis farmers in other countries. I raise this issue to give a slightly different perspective from the positivity we have heard thus far. I add a note of realism not to dampen the positivity we have heard but to ensure people are not led blindly into taking a gung-ho approach.

Chairman

I thank the delegations and members for their contributions. As they will have noted from the large number of contributions, it is difficult to manage time. I thank them for their forbearance. If our guests will pardon the pun, they have provided us with much food for thought. The common threads to emerge in respect of the forthcoming budget were the importance of maintaining the current agricultural schemes, the need to avoid retrograde taxation measures and the requirement to have more young people actively farming land if we are to achieve the targets set out in the 2020 strategy. We must realise the potential of the farming sector.

To address one of the points raised by Mr. Comer, members of the joint committee will visit Stormont next Tuesday to meet the Northern Ireland Committee for Agriculture and Rural Development. Areas on which we may have productive discussions include the Common Agricultural Policy, Common Fisheries Policy and animal health and welfare. The delegations should note that we are working towards addressing some of their concerns.

The joint committee adjourned at 4.35 p.m. until 2 p.m. on Wednesday, 16 November 2011.