Vol. 96 No. 15
I move:
That Seanad Éireann expresses its approval of the manner in which the Government is tackling the problems of the agricultural sector and of the steps being taken by the Government to improve farm incomes and reverse the downward trend in agricultural output.
I would like to thank the House for the opportunity to examine the motion that has been put before it. The problem referred to in the motion, as Members of the House will understand, is a problem which has been occupying the Government since last July and where we can define three main areas of the problem.
The first segment of the problem is the obvious problem we have in relation to farm incomes which is a matter I will dwell on in a little more detail in a few minutes. It is one part of the problem of which we must be aware. The second part relates to the volume of farm output. It is here we have run into a certain number of difficulties over the last couple of years which are serious not only in their direct effects on the incomes of our farming population but have very serious implications also in other sectors of the economy, in the agri-business sector and on a wider basis than that and which also affect the level of our export earnings and, therefore, our balance of payments problem. The third part of the problem which I think we must address ourselves to relates to the decline we have seen in our livestock breeding herds particularly over the past two years. This is the cause of part of our problem in relation to the volume of agricultural output but it is so important it merits particular attention as a separate part of the problem.
The difficulties that we experience now are not, of course, new. The problems I have referred to have been building up over the past three years. It is very important we should realise that because it has obvious implications for the kind of measures we can take in order to deal with those problems. We have gone from a situation in which during the period 1973 to 1978 we saw rapid increases in farm incomes and indeed an increase in the total volume of farm output, to a very different situation in 1979 and 1980 in particular, where we had falling output and falling incomes both in nominal terms and in real terms.
In 1981 the volume of agricultural output continued to fall but owing to a conjunction of other circumstances we have had a stabilisation of real income levels for our farm families. During 1979 and 1980, we saw a more rapid increase in costs of farm production than in the prices being received for farm output. In 1979, output prices increased by 5.9 per cent over the year whereas input prices increased by 12½ per cent. In 1980, output prices declined by 2.7 per cent but input prices continued to grow at a rate during that year of 14½ per cent.
This sharp divergence between the trend of output prices and that of input prices created the classic cost/price squeeze which gave rise to very severe pressure on farm incomes and the kind of drop in farm incomes over those two years to which I have already referred. The size of that drop can be appreciated by looking at what happened to consumer prices in those years. In 1979, the consumer price index increased by 13 per cent and in 1980 it rose by 18 per cent.
In addition to this cost/price squeeze we have had a decline in the level of output to which I have already referred. Taking 1975 as the base year at 100, the volume of gross agricultural output in 1978 was 111.5; in 1979, 110.6; in 1980, 110.7, which was no change, and in 1981, 108.3. There lies one of the main roots of the problem which we have at the moment. In addition, during 1979 and 1980 there was a serious amount of de-stocking particularly in our cattle herds and this resulted, for example, in our cattle breeding herd falling from 2.368 million head in 1979 to 2.245 million head in 1980, a drop of 123,000 in our basic cattle breeding herd. At the same time, there was an increase in the use of certain farm materials on farms from 1978 onwards at a time when the volume of output on farms was declining.
Again I refer to the volume figures. Taking 1975 as the base year at 100, in 1978 the volume of farm materials used was 147.5; in 1979, the volume increased to 175.2; in 1980, it declined to 153.2, which was, nevertheless an increase over the 1978 level; and in 1981 there was a further increase to 159.3. This has added to the effects of the cost/price squeeze. This is a problem which merits particular attention. If we have a situation where the volume of output is declining and the volume of input is increasing, obviously we must be very concerned about it.
There are a number of reasons why this might be happening on individual farms. It is perfectly conceivable, for example, that at the beginning of a particular year a farmer might have planned to buy in a certain number of cattle and would, therefore, have planned his feed and fertiliser purchases to cater for that level of activity on his farm. He might then have found that it was not possible for one reason or another to get that level of stocking on his farm and might, therefore, have found himself during the year overstocked with feed and fertilisers. That kind of situation obtaining on any kind of a wide basis throughout the country would have created to some extent a divergence between the trend in the use of inputs and the trend in the volume of outputs. In my view that alone is not a sufficient explanation of these divergent trends.
I would like to make the point straight away that in pointing out this trend and drawing attention to something which as I have said is a very worrying factor, I am not making the point nor am I suggesting that there has been any large-scale mismanagement on farms or that there has been any large-scale wasteful use of money on farms. I can see what might be some of the explanations for this divergence between the trend in inputs and the trend in outputs but I am not sure we know all the causes. Equally, until we have examined this in greater detail than has been possible up to now, we will not be able to make as good an effort at redressing the situation as we would like to make. This is a feature which we need to examine, and which is being examined closely by my Department, and if we find explanations as to why these things have happened then we can deal with them in a reasonable way. I will be very happy to do so and the farming community would also like to know the explanation for these trends.
The problem as I have outlined it has been building up over the past three years. It is only reasonable to point out that given that kind of background to the problem it is realistic to say that we cannot solve that problem in the space of a few months. The causes of the problem are fairly deep-rooted and they require action extending over a period in order not simply to eliminate the causes but to turn around the trends in output, in inputs and in incomes to which I have referred and to get ourselves back into a situation where we can look with some confidence for an increase in the volume of output, for an increase in the margins being earned by farmers on what they produce and, therefore, for an increase in the level of farm incomes.
A number of instant solutions have been put forward in recent months and it is worth looking at some of them in order to see what kind of contribution they could make. One area of instant solution that has been put forward relates to a devaluation either of our green currency rate or a straightforward devaluation of our currency. It would be useful if I were to indicate to the House some of the considerations which have led the Government to take the view they have taken in relation to these two matters.
Taking first the question of a devaluation of our green currency rate, I would have to say that were we to propose such a thing at the moment we would be proposing to pursue a course of action diametrically opposed to that which successive governments here have followed in relation to green currencies since 1973. The House will recall that our national aim in relation to green currencies during that period has always been to reduce the gap between our green currency rate and our market currency rate. The normal situation over that period was that our green currency rate used in the conversion of EEC prices and aids of various kinds into Irish currency tended normally to be above the market rate because our currency tended to devalue over that period. Successive Irish Governments have made the point that the proper thing to do was to align the two rates by bringing the green currency rate closer to the market rate of the currency.
We have a different situation at the moment. Were we now to propose a devaluation of our green currency rate, we would be proposing to create a new gap between the market rate of our currency and the green rate. We would be proposing to bring the green rate down below the market rate and that is the opposite of the policy that we have followed in this country since 1973. Without having put the question, I am quite sure that the reaction among our partners in the European Community and, indeed, in the Commission would be one that would be completely negative in this regard and would, again, be inconsistent with a number of things which we have been doing over the past few months and which we will continue to press in the forthcoming price discussions in the Community, one of those things being that we want to reduce monetary compensatory amounts now being applied in other countries which, in our view, are a hindrance to exports from this country to our partners in the European Community. For those reasons a devaluation in our green currency rate, attractive though it may seem, appears to me not to be a real option at this point.
The other question is, of course, the more general question as to whether we should seek to bring about a devaluation of the general market exchange rate of our currency. This was a question we were faced with last October during the realignment of exchange rates within the European Monetary System. At that time given what was going on in relation to the other currencies in the system and, indeed, our own economic situation here, the Government took the view that it was not the right moment and we were not in the right circumstances to justify a devaluation of our market rate relative to all of the other currencies in the European Monetary System. There are a number of reasons for that and I will refer only to some of the agricultural arguments in that connection.
A devaluation of our currency or, indeed, of the green rate would bring apparent immediate benefits in terms of the value in this country of EEC price supports and various aids. A devaluation of our currency would bring about the same result if we were to ensure that our green rate stayed in alignment with the market rate. It would also bring about certain costs on the agricultural side to the extent that our farmers use imported materials, raw materials, machinery and so on, and they would feel the effects of a devaluation in terms of an increase in the prices they would have to pay for those imported inputs. This is something that we should bear in mind particularly since we are at a time of the year now when farmers tend more to be buying inputs than to sell outputs. The least one could say is that the risk would be that the ill-effects of a devaluation on farm incomes would be felt at this point more quickly that the benefits in terms of increases in farm prices since we are in what is more a buying period than a selling period. When we add those arguments to arguments of a more general economic nature, we come to the conclusion that a devaluation of our currency is not an option that we would follow at this time to deal with the problem we have to deal with in the agricultural sector. I would make the point that indeed I have been saying this since last September. Some of those who have been putting forward devaluation as a solution to the problem appear since last week to have taken the points I was making and now say that they would look at it only as a last resort. We are not at a point yet where we need to resort to the last resort to deal with the problems before us.
Another one of the instant solutions being put forward is that we should borrow substantial amounts of money abroad to inject into the agricultural sector of the economy. I would make the point straightaway that the Government have no objection in principle or in practice to borrowing abroad for productive purposes. However, we have to deal with a problem which exists, which is the problem of servicing an already high level of foreign indebtedness. The servicing of foreign debt is taking up a substantial proportion of our current tax revenue. That being the case, the servicing of existing foreign debt puts a number of constraints upon the Government in terms of what they are able to do with the remainder of current revenue, either for current purposes within the economy or to support measures to help the productive sectors of the economy. Given the problems we have at present this does not seem to be the moment to incur further large increases in foreign borrowing because that would further constrain our ability to do the kind of things we want to do within this country.
That is a very broad review of the problems that we face and of some of the less likely solutions that have been put forward. I would like now to illustrate what has been done to meet the problem since we took office last July.
Almost the first thing we did was to lay before the Oireachtas the first Supplementary Estimate for agriculture of £35 million, prepared by the last Governfent before they left office, which we, of course, proceeded to pass through the Oireachtas in order to ensure that we could continue with the programmes that were in operation at that stage. We then announced a series of measures in the July mini-budget which were aimed at implementing points outlined in the Government's programme and which we believe would make a contribution to solving part of the problem with which we are faced.
We first of all secured agreement and then brought into operation an EEC interest subsidy scheme which applies to borrowings contracted by development farmers for investments eligible for aid under the farm modernisation scheme. This scheme provides for a 5 per cent interest subsidy in respect of outstanding borrowings for those purposes. That scheme came into operation on 1 September and so far the response to that scheme has been satisfactory after a relatively slow start. It is clear that that scheme does not apply to all investments made by farmers. The essential point is that it applies to those investments for which farmers have already got grant aid if they are working on development plans and it will apply to new investments carried out under the terms of existing or new development plans entered into by farmers. It represents a substantial reduction in the rate of interest to be paid on the loans in question. Even though it may not cover the whole of a farmer's borrowing, and in many cases it does not, nevertheless it represents a useful contribution to those borrowings which he needs to undertake in order to carry out the development plan which he has agreed to carry out.
Another measure which we announced in July which equally came into operation on 1 September was a reduction in the rate of value added tax on contractors' charges from 10 per cent to 3 per cent. Members of the House will know that this has been a matter of controversy for some time, not only among the farming community themselves but among the agricultural contractors who felt that the level of value added tax on their services in the circumstances made it difficult for them to continue in business. We have reduced the rate of value added tax there and that came at a useful time for farmers when many of them were coming to the point where they would be buying substantial amounts of services from contractors in the harvest period.
Another measure which we took at that time was to increase the flat rate value added tax reimbursement for farmers to offset the effects of the increases in the basic value added tax rate on those farm inputs which are subject to VAT. We increased the flat rate compensation from 1 per cent to 1½ per cent. On the basis of the information we have in relation to volume and prices of farm outputs and equally of farm inputs, I am fairly confident at the moment that the new 1½ per cent rate compensates adequately for the element of value added tax included in farmers' input costs.
Finally, in July we announced an increase in the rates of grants under the sheep headage scheme. Total increase in expenditure under this head would be in the region of £2.5 million this year and all of that expenditure will go into areas in the western part of the country where there was a clear farm-income problem and farm incomes were already low before we got into the problem that has emerged over the last three years. Those were the first measures that we took in order to respond to the problems that we found on taking office.
More recently we introduced a second Supplementary Estimate for agriculture of £37 million. Some of the more notable features in this Supplementary Estimate included provision of £3 million to finance a national interest subsidy scheme which will provide for non-development farmers a level of interest subsidies equivalent to that provided under the EEC scheme for development farmers. We provided an amount of £3 million under that scheme for this year. The cost in a full year would be somewhat more than that. In addition, that second Supplementary Estimate included a provision of £8 million extra for aids to farmers in less favoured areas in order to maintain in operation the various headage schemes that are in existence and a further provision of £13.3 million to cover expenditure under the farm modernisation scheme including the western measures and the EEC interest subsidy scheme. Therefore, between the measures we took in July and the other measures taken and reflected in the second Supplementary Estimate we have already begun to implement a number of points set out in the Government's programme and which address directly the problems that I have been outlining here.
In recent weeks we have made further progress in the sense that we have got EEC approval for a series of three national aids that deal with problems with which the House will be familiar. The first is a national aid for second-time silage makers. That is for people who last year, 1980, benefited from the EEC aid for first-time silage makers. That scheme was continued this year in order to provide extra encouragement for people who made silage for the first time in 1980 to make sure that they continue making silage. We are trying to ensure that more and more farmers get into the habit of making silage because it seems on all the advice we have that it is a very good method of conserving winter feed and one which should be more widely followed throughout the country. The schemes in question have shown that it is possible and viable to make silage in areas of the country where silage-making had not been the practice up to now.
The second measure is a subsidy of £30 per ton for one ton per farm of nitrogenous fertilisers announced earlier this year. The third measure is designed to encourage further increase in our breeding herd. I refer to the scheme which provides for a £70 subsidy next year in the form of an interest subsidy in relation to extra breeding heifers kept on farms in June of next year compared with June of this year. I would like to say a few words on this because there has been considerable public discussion of the measure and what it constitutes.
The previous Government announced their intention to pay a £60 subsidy on extra heifers in the herd. Part of our Government's programme was to pay £100 subsidy, £60 of which would be paid in 1982 and the remaining £40 two years later. Our intention was to bring in a measure which would ensure that extra heifers brought into the herd in 1982 would be retained. This is a national aid measure funded from national resources which would have an effect on the level of our breeding herd and, therefore, on the volume of our production. That being the case, it is necessary for us to clear that measure with the EEC authorities and with the Commission. Immediately on taking office I took the matter up with the Commission authorities and during the discussions which I had with them I found a certain reluctance simply to allow the measure to go ahead in the form in which we had put it forward. A number of suggestions were made to me as to other ways in which we might go about achieving the result we desired but my view was that we needed a specific measure that would directly tie an increased aid to an increase in the number of breeding animals in the herd. The agreement we reached finally was that we would be able to pay £70, not £60, in 1982 and that it should take the form of an interest subsidy. My intention will be that that subsidy should be paid, if at all possible, on every extra heifer in our breeding herd in June of next year compared with June of this year. The original measure which we put forward was part of a four-year programme to bring about an increase in our breeding herd. The measure which we now have in operation is a one-year measure which will apply in 1982.
That is not by any means the end of the story. It is still my intention to carry on with a four-year programme to expand our breeding herd. We have the first part of it in operation. I will be taking up the remaining part of the first subsidy during the course of the forthcoming price discussions in the EEC and in future years I will be taking up the continuation of that measure or a measure that will have equivalent effect to ensure that we will get the kind of increase in our breeding herd that we want to bring about.
I referred to the national interest subsidy which we brought into operation. That is a 5 per cent interest subsidy scheme which is parallel to the EEC interest subsidy. As I said, those subsidies will not cover all of the problems for a number of farmers who have serious financial difficulties at the moment. My concern is to ensure that farms which are basically commercial units capable of providing a decent living for a farming family should be able to stay in production and I am looking at measures which will enable us to achieve that aim.
The House will be aware from press reports and so on that a separate discussion is going on between myself and the lending institutions in order to arrive at this result. Those discussions have not yet been concluded and I cannot say when they will be concluded. The intention of the measure being discussed is to ensure that farmers in serious financial difficulty will be enabled to overcome their immediate problem in order to stay in production and think again in realistic terms about expanding production. In this respect we must recognise that some farmers are facing serious financial difficulty, not because of mismanagement or bad lending or borrowing decisions, but for the simple reason that farm plans which can show a profit when money is available at 10 or 12 per cent may very quickly become unprofitable when interest goes to 19 per cent. That problem has afflicted farm enterprises over the last couple of years just as much as it has afflicted production enterprises in other sectors of the economy. We must recognise and deal with this problem to the best of our ability, not only for the sake of the farm families involved but also for the sake of all those people whose livelihood depends directly or indirectly on agriculture.
I have outlined some of the measures which we have taken and one which we are in the process of negotiating at the moment. I talked about the price cost squeeze. We need to do two things in order to get out of that. The first is to tackle inflation, to find a means of reducing the rate of increase in costs of inputs and the cost of living for our farm families. This Government are committed to that and further measures to deal with it will be forthcoming. We must also look at the price side of that equation. In this connection I am looking at our approach to the Brussels farm price review which will begin early in the New Year when the Commission publishes its price proposals. I will be looking for as much increase as I can possibly get from that discussion, in the grand tradition of every Minister for Agriculture we have had since 1973 when we joined the Community. In addition, I will be looking for other complementary measures, as they are called, to deal with problems which we have which do not apply either at all or to the same degree in other member states of the EEC. I have already told Commissioner Dalsager that that is my intention, and he was not surprised to learn that. We will be discussing and approaching the price proposals with that in mind.
It is difficult to say at this point how much one wants to look for. Therefore I will not go further into that. Even if I knew what the figure was I would not say it too loudly. You do not start such negotiations by showing your hand in advance.
Another reason for being cautious about saying what we are looking for, which is related to policy in the EEC, is that we are still in the middle of a discussion on the mandate of 30 May. One of the elements in that discussion is an effort on the part of some of our partners to ensure that the rate of increase in expenditure on the common agricultural policy is not greater than the rate of increase in the total budgetary availabilities of the EEC and a desire on the part of some interests in the Community to ensure that we fix the total amount of spending on the CAP at or about its present level. We must view that development with very serious disquiet.
At the European Council in November and at meetings since then, the latest on 15 December, and a forthcoming meeting around the middle of January, we have been and will be ensuring that that kind of development will not come about. We need to be sure that within the European Community the conditions exist for us to be able to continue to expand our agricultural production at whatever price levels we manage to get agreement on during the course of the annual price negotiations. I am very conscious that as an exporting country we need to be sure that whatever measures should be taken within the EEC to sustain an expansion in agricultural production in a country like ours are taken and that our hands are not tied in advance by artificial or autonomous limitations on the amount of funds being made available to support the common agricultural policy. That is one of the priority areas of activity which we are following at the moment.
I pointed out the problem and what we are doing in order to remedy it. In spite of the fact that we have come through three very difficult years in agriculture, I still take the view that we have not come to the end of the road. We still have a sound basis for further expansion in agricultural production. We have seen this year at least a halt to the decline in farm incomes. The final results for this year will probably show that in money terms total farm income will have risen by somewhere in the region of 20 per cent or, in other words, that total farm income will be in real terms at about the same level in 1981 as it was last year. That, perhaps, is not the result we would wish to see but it is an improvement over the decline we have seen in the last two years.
Something which is easily forgotten in the kind of debate that has been going on for the last few months about the difficulties we have in agriculture is that a very substantial amount of investment has been carried out on farms in this country, particularly under the farm modernisation scheme. That infrastructure is available to sustain increases in production in the years ahead. Some discussion which takes place would almost lead one to the conclusion that all of the investment up to now on farms in terms of improvement in farm buildings, construction of new farm buildings and land improvement has been lost. It has not. It is there to sustain increases in output over the coming years. With a continuation of the kind of measures that we have introduced I am confident that we will see increases in production during years to come. They will not, perhaps, be as rapid as we would wish but they will not be held back by any reluctance on the Government's part to follow the kind of measures that are needed in order to get us out of the problem we are in at the moment.
I move amendment No. 1:
To delete all words after "Seanad Éireann" and substitute the following:
"is deeply concerned at the manner in which the Government is tackling the problem of the agricultural sector and calls for a halt to the decline in farmers' incomes."
In tabling this amendment I was concerned about the situation that our farmers find themselves in at present. Not since the bad old days of the Economic War have we seen such gloom and despair in Irish agriculture. Over the past few months we have seen the farmers, both big and small, marching and taking part in pickets on the Agricultural Credit Corporation and the banks. We even had a sit-in at the headquarters of Fianna Fáil and at the Fine Gael headquarters here in the city and there were many other activities by which the farmers throughout the length and breadth of Ireland have shown or tried to highlight the situation that they find themselves in. Much has been said about the bigger farmers who find themselves in trouble now because of the over-borrowing which took place over the past couple of years, and many of them are, unfortunately, in that situation. Those are the leaders in the farming community; those are the people who led the way when times were good and decided to invest in the development of their land and decided to erect modern buildings and so on. Also the farmers in the west have been affected seriously by the depression in agriculture over the past couple of years.
In October of this year the Agricultural Institute in their report revealed that income on western farms under 30 acres last year averaged £15 per week. This means that the bulk of western farmers earned less than £1,000 in the year. On farms in the 50-100 acres category income amounted to only £33 per week or £14 per week less than can be got by a married couple with two children on unemployment assistance. Perhaps the western farmers have not been shouting loudly enough about the situation, but it is very serious. They have not the chance to develop as other farmers in the better-off regions of the country might.
I am disappointed that money has been taken out of the two schemes that were launched principally for the development of the west and spent in other areas. I refer, in particular, to the western drainage scheme which I launched in 1979 for the purpose of draining and reclaiming a quarter of a million acres in the west of Ireland. This was one of the most forward-thinking schemes ever introduced into the west and for the first time it gave the western farmer the chance of developing his farm and reaching the same development potential as his counterparts in the rest of the country. I am afraid that this scheme is grinding slowly to a halt and I am horrified to see that happen. A sum of £1 million has been withdrawn from that scheme and I would appeal to the Minister of State, Deputy Nealon, who is present and who is responsible for western development, to make sure that that scheme is protected and that it goes ahead and reaches the target which was set in 1979, which was to reclaim a quarter of a million acres of the west of Ireland.
The same applies to the £300 million western development programme. Here again, we see that £5 million has been taken out of that scheme. This is disgraceful when western farmers are struggling on £15 a week as I have quoted earlier. This scheme was designed principally to help them to develop their farms and now money has been taken out of it by the Government.
The same applies to the headage scheme. We see the change that has been made in that scheme in recent times, particularly since this Government took over. Many farmers this year who were relying on headage grants to pay off their debts found that they were not getting even as much as they got last year because of the changes made in the scheme this year by the Government. Again, I would appeal to Minister of State Nealon, who appreciates the problems of the west, to have a look at that scheme and to restore it to what it was when we left office.
During the general election Fine Gael in their election manifesto promised to restore farm incomes to the 1978 level as soon as possible. Now, six months later, because of the inflationary policies being pursued by the Government, the position of our farmers has deteriorated seriously. The Government cannot continue to ignore the very serious situation of our biggest industry. Fianna Fáil's objective in Government, as soon as the crisis in agriculture became apparent, was to restore farm incomes and to take measures that were necessary to bring back confidence into this vital sector of the economy. No fewer than six different packages of farm support measures where announced between August 1980 and June 1981 — evidence indeed of Fianna Fáil's absolute commitment to the farming community. In August last year, faced with a disastrous storage situation, Fianna Fáil introduced subsidies for first-time silage makers and for nitrogen users. These emergency measures succeeded in taking farmers over the winter without breakdown. In October 1980, we took action to relieve rates on farmers below £60 rateable valuation. We also succeeded in obtaining foreign loans at attractive interest rates and in getting the co-operation of the banks and the lending institutions in restructuring loans to farmers experiencing difficulties. There was also extra finance for livestock headage grants and for the farm modernisation scheme.
In the January budget, further progress was made in removing or relieving the rates bill of the vast majority of farmers. Full tax relief on stock and the removal of the disease eradication levies were also provided. In March 1981, we succeeded in negotiating one of the most favourable farm price rises since we joined the EEC, providing an average price increase of almost 14 per cent. There was also a special aid package, worth £52 million. providing fertilisers and silage subsidies and doubling beef suckler grants. In April 1981 we obtained final agreement to the western development package which would provide £300 million to improve the infrastructure of farming in the western region over the next ten years. In May 1981, Fianna Fáil provided a subsidy for in-calf heifers, a nitrogen fertiliser subsidy and a silage making subsidy. At the same time we obtained agreement in principle to 5 per cent interest subsidy for developing farmers, an aid for land drainage which the present Minister succeeded in having ratified by the EEC Council of Ministers after he took office.
From this brief summary of our record it can be seen that we worked unremittingly and hard to achieve a situation where a reasonable rise in farm incomes for 1981 could be expected. I am convinced that this Government have not yet come to grips with the problems of agriculture. Indeed, they have taken actions which are directly detrimental to farm incomes. High interest rates at present are crippling farmers and this is one of the main causes of their income problems. When Fianna Fáil were in office they took action to keep interest rates down to 14½ per cent. They have now risen to almost 20 per cent under the present Government.
The budget measures which were introduced last July put inflation up by 5 per cent and hit hard at many of the things which farmers depend upon. The Minister this afternoon outlined what he has done since he took office and spoke of the money provided for agriculture. If the Minister in his Estimate and subsequent Supplementary Estimate provided this money, in the budget last July he succeeded in taking £75 million out of our farmers' pockets. That is what it amounts to. The 5 per cent increase in value-added tax succeeded in taking £75 million out of farmers' pockets. The Minister has not yet balanced that by putting back into agriculture what he took out in the July budget. On the day the 5 per cent interest subsidy was announced by the Coalition, a general rise in interest rates of 2 per cent was announced and also a cut in land reclamation and other grants under the farm modernisation scheme. This cut-back of 5 per cent in grants under the farm modernisation scheme, as far as I am concerned and as far as the farmers are concerned, is a most retrograde step.
Over the years, farmers have been trying to develop their farms, to provide modern buildings in which to accommodate their stock for the winter months, to build silage slabs, concrete their yards and so on. This in turn created jobs in other industries. It created jobs in the builders' suppliers and so on. It created jobs for small building contractors. Now there is a complete standstill in this kind of activity. Farmers are no longer interested in developing their farms or in providing modern type buildings which we were so anxious to see them provide over the past few years. This is because of the cut-back of 5 per cent under this scheme. It is a very retrograde step and I sincerely regret to see it happening at this time when we should be trying to instil a little confidence into the agricultural industry and trying to help farmers to forget about the depression and get out and work their farms. Unfortunately, that is not the situation at present. The measures taken earlier this year have helped in a small way to improve farm incomes. However, the fall in the volume of gross and net output represents a major setback to the contribution by this sector to the development of the economy.
Furthermore, the disparity between incomes in farming and average earnings in industry is greater than at any time during the past 20 years. Indeed, it is in this context that the role of agriculture in the economy must be looked at afresh. Agriculture is an important sector in our economy, earning foreign exchange and contributing to employment and income generation in the rest of the economy. These contributions come through a number of channels. One, the agriculture sector is a major net exporter and thereby contributes to easing the balance of payments constraint on Government policy; two, it provides raw material for the food manufacturing sector; three, it purchases raw materials, capital inputs and services from the manufacturing and commercial sectors; four, it also purchases consumer goods and services from these sectors. Between 1970 and 1978 gross agricultural output in value terms grew by 21.9 per cent per annum.
The effect of a continuation of this trend from 1978 to 1981 would be an increase in value of net exports in 1979 from £179 million to £336 million, in 1980 from £348 million to £458 million and in 1981 from £600 million to £790 million. The extra gross output if the 1970-78 trend in gross output had continued would be £360 million in 1979, £594 million in 1980 and £1,025 million in 1981. From these figures, it is clear that the moderation in the rate of growth in the value of gross output since 1978 has had a major impact on the balance of trade. In 1981, if the trend in the growth of value of output had been maintained, net agricultural output would have been £600 million to £790 million higher.
The fall in the growth of output has had serious repercussions for aggregate living standards. We have between £600 million and £800 million left to spend on capital and consumer goods imports. This is a very serious loss to the country and if that kind of money were available to the Government at the present time they would be very happy because it would help them to solve many of the problems they are faced with at present. On-farm employment has been declining in all countries in recent years, regardless of on-farm growth in output. The main contribution which agriculture could make to employment is in the food processing sector and the farm services and input sectors.
Increased farm incomes also have an impact on employment and incomes in sectors which sell consumer goods and services to farmers, such as the retail trade, the house building and improvement trade. Over the past decade the employed in the food sector has not increased relative to the rate of agricultural output. In fact, the number has declined from 46,200 in 1973 to 43,990 in 1981. Perhaps this is due to an improvement in technology, or greater efficiency in that particular sector.
The meat industry is an area where many jobs could be created. There is a demand for vacpacked meat, particularly in Germany. There is no reason why this could not be expanded still further in Germany and, indeed, in the other European countries. There is a great demand there for that particular type of trade and it is something which the Department of Agriculture and Córas Tráchtála should explore and develop still further. Of course, it is important to supply top quality meat and also to guarantee continuity of supply, because if this does not happen then the market could be lost for all time.
There are many people, particularly in the meat trade, who would like to see all our meat and all our cattle going through the factories and processed there. Certainly, I would not favour that kind of situation and I do not think anybody involved in the cattle trade or anybody involved in farming would like to see the factories get the monopoly of this business. We all know how they treated the farmers back in 1973 and 1974, when markets were bad and when they had a monopoly. They were not too kind to the farmers during that depressed period. It is important that we would have competition within the trade. That is the way it is at present and that is the way it should remain. There is no reason why both could not be developed side by side.
Many suggestions have been made as regards the method of improving farmers' incomes. First would be higher prices for farm products; second, lower prices for farm inputs; third, increased farm output; fourth, more efficient use of surplus inputs and other resources; fifth, lower taxes on farmers or on farming; sixth, direct payment to farmers related to their farming activities and seventh, income from non-farming sources including social welfare. We know, because of the basic principles of the common agricultural policy, that it would not be permissible for the Government to subsidise directly the prices payable to Irish farmers for farm products. Possibly these prices could be increased by a devaluation of the Irish green £, but we have heard the Minister this evening outline his objection to that course of action. However, it is one area at which perhaps another look could be taken. There seems to be a volume of opinion in favour of doing that and I would sincerely ask the Minister and the Minister of State to have another look at that situation to see if anything could be done there to secure an increase for the farmers.
Lower prices for inputs, of course, could be achieved by subsidy. In 1980 the cost of farm materials and agriculture expenses, exclusive of rates, amounted to £930 million. A ten per cent subsidy on all these materials would cost £93 million. It may not be possible to give an across the board subsidy but certainly fertilisers and feeding stuffs should be subsidised. In 1980 the expenditure on these materials was £316 million and £166 million, respectively. Together they accounted for over half the value of farm materials and expenses. We know that in this particular year the price of fertilisers is well outside the reach of most farmers. The price of fertilisers at the present time is prohibitive and there is no way in which farmers will be able to use the amount of fertiliser that they would like to. Unfortunately, this is going to lead to further problems. There is a strong case to be made here for subsidising fertilisers. Certainly I would like to see that happening. I would plead with the Minister and the Minister of State to introduce some kind of a subsidy scheme to help farmers to purchase those fertilisers that are so necessary at this time in order to help to increase their output on the farms.
We could go on making many suggestions as to how farmers' incomes could be increased at this point in time. Another area that could be explored would be a general increase in the rate of headage grants. In order to do that, possibly it would be necessary to extend the severely handicapped areas in the country in order to recoup some of the costs from the EEC. This, I realise, perhaps more than anybody else, is not too easily done. Perhaps in the present situation where the incomes of farmers have dropped by about 60 per cent in the past three years, there is a good case to be made for a further extension of those severely disadvantaged areas in order to bring them in under the headage payments and for a general increase in those headage grants. It would help, in a small way, to eliminate the present hardships. We all know individual cases of hardships, I am sure that the Minister has many files on his desk dealing with the problems of over-borrowing and so on. It is unfortunate that that situation should arise at this time because it is some of our best farmers, some of the leaders in the industry, who are caught in this situation and, unfortunately, they are not convinced that the Government are doing enough to help them.
I hope that this debate this evening will help to highlight some of the problems that exist in Irish agriculture and that perhaps some suggestion will come out of the debate that might help the Minister to tackle this very serious problem. If agriculture, our major industry, is declining then the whole country is going down with it. We do not want to see that situation arise. We want to see a thriving agricultural sector. We want to see farmers having the same incomes as their counterparts in industrial employment. Unfortunately, that is not the situation at the moment and farmers have had to do things in the past few months that are not very popular, but they were necessary in order to highlight the problems that exist within the industry at this time. I hope that in the not too distant future we will see better days ahead for all those people and that we will see a light at the end of the tunnel.
I wish to second the motion. I was greatly disappointed at the speech of the Minister for Agriculture, who concluded his speech by saying that those are some of the things that the Government are doing to get us over our problem. In actual fact, he did not outline anything. A speech such as that is an opportunity for him to outline in detail to this House, as he had an opportunity earlier in the Dáil, his plans for agriculture. He came in with a great blare of trumpets and I thought that he would outline for us whatever plan he envisaged for agriculture. Instead, he mentioned a few — and a very few — measures which were introduced, measures which were only helpful to a very small section. He did not mention a farm plan. He did not mention land policy. When you are discussing a farm plan, you have to discuss the general land policy and land structure.
Fianna Fáil, in their last years of office, spent a lot of time and brought forward a White Paper on land policy. There is no doubt that, had they been returned at the last election, in all probability we would be discussing now the land policy, a land policy designed to ensure the continuation of many farmers in, especially, the western and north-western regions, giving subventions to persons on small acreage and putting an embargo on those in the very high acreage bracket.
The Minister did not mention during the course of his speech the farm retirement scheme, something that was introduced in 1976. At that time I can remember asking the Department to send me over application forms in the belief that that scheme would serve its purpose and that it would ensure that many farmers would get an opportunity either to retire on a permanent basis or lease the land on a leasing system. Where you have something like 500 applications in as many years, all we can say is that it was a failure and that it is one thing that would certainly need to be restructured.
At the moment, the farmers will agree that we must have a farm plan and specialise in various aspects in particular areas. They will have to develop to survive. The Minister mentioned a few of the measures he outlined in the July budget and in a Supplementary Estimate. He mentioned a subsidy scheme for development farmers, but here, as Senator Hussey mentioned, in 12 western counties the percentage of development farmers as against the total number of farmers is very small. Many of them would not qualify.
The Minister also mentioned that the rate of value-added tax was reduced. Here again, he mentioned specifically that the benefit would be in the harvest period. The harvest period does not concern people in the 12 western counties because, in the constituency I come from myself you have only 3 per cent of the total acreage in crops. He mentioned an increase of rates in the sheep headage scheme. There again, only selected areas of the country would benefit.
In the supplementary budget, the Minister was duplicating the Fianna Fáil proposals. He mentioned the extension of the silage making subsidy and the extension of the subsidy on nitrogenous fertilisers. But if you compare the measures introduced in the autumn of 1980 with the measures introduced in 1981, it certainly will show you the imbalance and how little has been done this year for the farmers. At that time £40 million was provided in the autumn of 1980. The Minister also mentioned this £70 in-calf subsidy and how he expected that it would ensure an increase in our national herd. One of the most serious problems facing agriculture at the present is that of ensuring an increase in the national herd. The Minister did not mention that applicants who qualified are persons who had borrowed to purchase. It is an interest subsidy and I take it that you would have to be a purchaser to qualify for it. If that is the case, I can see a very serious situation arising: because of the disease problem at present, it is generally accepted that it is safer for any farmer to keep a closed herd of his own and upgrade his own breeding stock than to purchase in. I can see that danger in this £70 in-calf subsidy. Certainly any subsidy and any input are to be welcomed. I see a problem here in that farmers who would not normally purchase in will not qualify and that certainly would create an anomaly.
When discussing farming, one does not wish to departmentalise it but one must realise that farming in the 12 western counties is completely different from farming in Munster and Leinster. Senator Hussey mentioned the possibility of treating the 12 western counties as severely handicapped and this should be examined so that farmers there would qualify for cattle headage payments. Under the terms of EEC Directives 159 and 268, member states are authorised to introduce special aids and incentives to encourage better farming and raise farm income. One of the purposes of EEC Directive 75-268 is to encourage the continuation of farming in the poor and more remote areas of the country to help maintain the level of population and the preservation of the environment. Under that directive I would hope that the Minister would make a very strong case to have the 12 western counties classified as severely handicapped to qualify for the headage payments. There is an opinion abroad at present that if the entire 26 counties were declared severely handicapped and so qualified for such grants, that would be the quickest way to improve our national herd. The criteria laid down in order to be classified as severely handicapped is that there is less productive land unsuitable for cultivation and used mainly for pasture and also the average farm income is appreciably less than the national average and the diminishing level of population depends mainly on agriculture. The western counties fit into any of those criteria.
In Cavan-Monaghan, where I come from, less than 3 per cent of the land is cultivated. The main features of that part of the country are the predominance of drumlin soils and hilly land where it is extremely difficult to operate farm machinery so that cattle and milk production are the lines of farming. In this area we have the longest winter and the shortest grass-growing season in the State, and over 50 per cent of all farms are less than 30 acres. Compared to the rest of the State this is a very high percentage.
The Minister mentioned the benefits of silage making. The importance of conserving winter feed in this way cannot be too greatly emphasised. I would hope that incentives would be given, not only this year as they were last year, but in years to come, to ensure that as many farmers as possible would get into silage making.
The situation facing us at present is that there are low milk yields and the national average for cows is very low. We did not have the expected increase in milk production. This is causing problems for the producers and also for our co-operatives. Here again they had programmes to ensure that there would be an increase in the gallonage. If that does not materialise, the overall price of milk will suffer. The co-operative movement should be pursued. It has not developed in Ireland to the degree that was indicated in the early days. Over the years the country gave many prominent men to the co-operative movement, Paddy the Cope, Maurice Plunkett and Father Finley. To a great extent it has limited itself to the management of marts and creameries and, recently, meat plants. In a highly competitive world a fresh look at the potential of the co-operatives is needed; co-operative farming could be followed through in many areas. Many of the member states in the EEC have developed the co-operative movement to great advantage. In regard to the western package we are all greatly concerned that there was a reduction of £5 million in the amount allocated in the Supplementary Estimate and in regard to the western drainage scheme there was a reduction of £1 million. It is of great concern that in an area where we had hoped for development funds are curtailed at this time.
Included in these measures was the calf to beef system. If we want to improve our method of production, especially in the beef sector, we have to ensure a regular in-flow of cattle to the factories. The only way we can do that is by way of some type of cantract system. There is much criticism in regard to the export of live animals. Here again there has to be a counterbalance to ensure that the producer gets the best possible remuneration for his work. Certainly there is great potential for labour in the meat industry. It is really sad that when so much money has been expended and the IDA have been so generous in providing funds for the development of the meat plants and equipment, especially the very expensive equipment in those bone halls, that more use is not being made of them. There again the former Minister for Agriculture, Deputy MacSharry, provided assistance and aid in 1980 to ensure that as much beef as possible would be deboned and go out in that state and would so create as much employment as possible.
Mention has been made of fertilisers. The drop in fertiliser usage could be serious. After the last war when money was scarce, advisory services and the co-operatives played a great part in ensuring that fertilisers would be available to farmers at a fairly low cost. I remember, when I was associated with a co-operative, delivering 8 per cent basic slag to farmers from the quays in Dublin when the boats came in, at £4. 10s. a ton — that was before decimalisation — so that the farmers could build up the fertility of the soil. Fertiliser prices increased with inflation generally. When grant aid was provided for the fertiliser industry in this country, especially NET, we thought we would be getting a good quality fertiliser at reasonable prices. But fertiliser prices have rocketed over the last few years and this could result in a drop in usage which would seriously affect fertility.
There are many other areas which could be developed. In the Dail, Deputies were concerned about the importation of potatoes. In the matter of fruit and vegetables, the Department of Agriculture should examine very carefully the situation where we have massive imports of fruit and vegetables which in many cases we could produce here and for which we have ideal conditions of climate and soil. Increasingly over the last few years, not alone in regard to early potatoes but in regard to the main crops, we have had to contend with severe competition from imports. This is a very serious situation.
Yesterday, Deputy Martin O'Donoghue said that farming was in need of an IDA-style body. Farming is certainly in need of some injection of funds to ensure that as many families as possible can stay on the land. Agriculture is our major source of revenue, employment and income. It should be developed with all possible speed in all areas possible. We should be aiming at the time when we will no longer be importing products which we could produce here, giving employment and reducing the dole queues.
Senator T. Hussey emphasised the damage that has been done to the economy by the present crisis in agriculture. I could not agree with him more. In approving of the manner in which the Government are handling this crisis we, on this side of the House, are not in any way trying to diminish the problem, which is, indeed, really stark. Output is down 7 per cent since 1978 and the average family farm income in 1980 was £3,700, only about half of the industrial earnings in the same year when one makes allowances for the number of labour units involved in the farm. About 55,000 farms, or 38 per cent according to the survey in 1980, had incomes from farming of under £2,000 or £38 per week. There is no doubt that that is a crisis of immense proportions.
Apart from the low income problem which has been documented, many farmers face serious problems with their borrowings. ACOT estimated that 6,000 farmers cannot meet their interest payments, and a further 4,000 farmers cannot meet interest and repayments jointly.
There is no doubt on this side of the House that there is an immense problem but we must recall that the present crisis had its beginnings in 1979. It started when prices obtainable for agricultural output began to slow down while input prices continued to forge ahead. That slowdown in agricultural output was easy to forecast in advance. There were quite identifiable reasons for it which could have been and should have been known by the then Government. One was that the EEC transitional payments had comt to an end in 1978, and the second was that the Government opted to join the EMS. The whole point of the EMS was that it was a stable currency regime which would bring about the end of the green pound devaluations which had the effect of giving agriculture, farmers, significant price increases. In 1979, it was incumbent on the Government to plan for an orderly transition to what was going to be a tighter profit margin situation. Indeed, they should have been attempting to forestall the worst effects of that.
I will remind the House what the response of the Government was in 1979. They were worse than Nero who fiddled while Rome burned; they poured petrol on the flames and aggravated the problem in agriculture. In the 1979 budget they introduced a series of measures that were tailor-made precisely to put the squeeze on profits. There was a resource tax of £3.50 per £ of PLV; there was a 2 per cent levy on commodity production; there was a disease levy of £3 per beast and a halfpenny per gallon of milk; there was a milk quality levy; and there was an inspection levy at factories. All of these measures were unique in that their payment was not related to the profits that the farmer was able to earn. They were related either to output or to land, and their net effect was to squeeze profit margins. The introduction of those measures was a very badly informed action of the Government, when it was easily recognisable that prices were going to squeeze profit margins in farming.
At the same time the Government allowed inflation to run away in the domestic economy. This was provoked by their tendency persistently to spend beyond the revenue they were willing to raise in taxation. They built up a steamhead of demand in the economy when it was not necessary, that caused the domestic inflationary pressures. They also caved in to pay demands repeatedly when they should have stood firm. In fact, the recent report of the Committee on Costs and Competitiveness illustrated just how bad the performance in 1978 to 1980 was. Irish hourly earnings rose by 22 per cent while the hourly earnings of Europeans, our competitors, grew by only 13 per cent per annum. Those rising domestic costs here affected farmers first and foremost who had to pay high prices while they were stuck on low EEC prices. In short, in the two years 1979 and 1980, the farmers were harried and harassed by a series of measures by the then Government. While they were telling farmers to expand output they were, at the same time, making that expansion all the more difficult for them.
In June of this year when the present Government came into power they found that not only was agriculture in a shattered position but there was a deficit in the Department of Agriculture's Estimate for existing schemes of £57 million. The outgoing Government had under-provided money for agriculture that was so badly needed and left it to the incoming Government to find revenue to meet that deficit. The Government, as a token of their commitment to agriculture, not only made good this shortfall but launched a major programme, a three-pronged attack, in my view, on the present crisis in agriculture. It has centred on the three areas of borrowings, encouraging more output and reducing input costs to farmers. On borrowings, the Minister outlined the measures that are intended. I will only briefly mention them here again. There was the 5 per cent subsidy from the EEC scheme for farm modernisation work; there was a similar subsidy of 5 per cent for other farmers not included in the EEC scheme. Together these are open to about 90,000 farmers. When one considers that the Foras Talúntais estimate of the number of farmers with borrowings is less than half of that figure, it can be seen that this is something that will really make a significant impact on farm borrowing problems. There is also a special package under negotiation at present with the banks which the Minister described which will be aimed particularly at the 6,000 farmers who have the serious problem of not being able to meet their interest payments. As the Minister said, it would be a tragedy if those families were prevented from continuing in farming and having a decent living for their families.
In the area of promoting output, the Minister also dwelt on some of the measures that have been brought forward. There are several. There was a 14 per cent EIB money for livestock expansion and for ancillary buildings and so on for that livestock expansion; there was an extra 50,000 hectares in the western drainage scheme and the most recent £70 subsidy for additional calved heifers which was implemented between mid-1981 and mid-1982. The Minister has indeed committed himself to seeking a continuation of this scheme and he hopes to bring the subsidy up to £100 as we had outlined in our programme.
With regard to the area of input costs, which again is the other side of the squeeze that has come on farmers' incomes, the Government have a very clear programme to bring down the costs to farmers. The most important in financial terms is the abolition of rates on full-time farmers, which was a firm commitment in our election programme. We will proceed with that as soon as possible.
We have already cut the VAT on farm contractors from 10 per cent to 3 per cent and we have alleviated any of the indirect taxes in the budget, a budget that was brought in in July to make up for the shortfalls in the previous Government's provision for the spending programme. We have made good the damage that might have been done to farmers by those increases in direct taxes by raising the refund to 1½ per cent. The Minister said today that he is confident that that is providing complete compensation for the extra tax that farmers might have borne. Together these proposals will, I reckon, put about £80 million into the agricultural economy in 1982 on top of what would have been there already. This has been a really significant contribution by the Government in what has been perhaps the most difficult financial crisis that any Government has had to face. It is a measure of the Government's commitment to the agricultural sector.
I would like to turn now to the present situation in agriculture as was described in a press conference earlier today by An Fóras Talúntais. It is heartening to see that progress is being made in agriculture and that the agricultural sector is responding to the measures that we have brought in in a very short time. An Foras Talúntais now reckon that, in 1981, farm incomes will grow by 20 per cent. This will arrest the continuous decline in real incomes that occurred in agriculture in the past two years. Certainly we are not happy with the low level they are at but at least the decline has been arrested. It should be said that before the present Government came into office the predictions were that real incomes in agriculture would fall by 5 per cent.
So we must appreciate that in a very short time the Government have succeeded in pulling around a predicted fall in farm incomes to a situation where that decline has been arrested. An Foras Talúntais are predicting that, in 1982, output will grow by 3 per cent in agriculture across all enterprises. They say that cow numbers will be up by 50,000. These are very significant increases and it shows that in response to the measures, particularly the in-calf heifer scheme, cow numbers will be rising and output will be rising across the board. An Foras Talúntais are also hoping and predicting that there will be a rise in farm profitability in 1982. The underlying rate of inflation is coming down very dramatically. It is now estimated that in December 1981 to December 1982 the underlying rate of inflation will be down to about 11 per cent. So farmers will be getting a significant easing in the rate of increase of their input costs.
What happens to farm profitability will depend on what happens in Brussels this year at the price negotiations. The Taoiseach and his Ministers are to be commended for the assiduous work they are doing at present to achieve major increases in prices. Only yesterday the Taoiseach was in Paris discussing with President Mitterrand — who is likely to be our closest ally in seeking high price increases — the whole agricultural situation and seeking his support. The Minister for Foreign Affairs has also been actively involved as has the Minister for Agriculture. We are placing this as a very high priority as is evidenced by the amount of Government and Ministers' time that is being devoted to it.
The Government are acutely aware of the importance of agriculture in the economy. The present problems in the economy are much concerned with out ability to earn foreign exchange. Agriculture is at present providing 35 per cent of our exports but even that figure underestimates its contribution, because agriculture has a very low import content. If one looks at the value added on what we are exporting, agriculture's contribution is about 45 per cent of domestic value added. It is a major contributor to the big problem facing the Government at present of servicing foreign borrowings and of providing enough foreign exchange to buy badly needed imports.
Although the Government have taken excellent action to arrest the problem of the decline in agricultural incomes, they are far from complacent about the magnitude of the problem that still confronts Irish agriculture. Senators today should turn their attention to the major longterm problems that will confront agriculture over the medium term. The first job is to confront the threat to the Common Agricultural Policy that is coming from Britain and Germany. The second thing raised by one of the speakers here is to tackle the problem of land structure here. The final one is to get farm development back on the rails after the shock of the last two years. There is no doubt that in the present crisis, some of those who have been worst affected were those progressive farmers who took the chance and invested and now have serious problems. The Government are taking action to alleviate their problem but we must also attempt to get farm development back on the rails.
I would like to say a few words about each of those headings. On the common agricultural policy and the threats to it, what I have noticed in recent weeks is that many farmers are understandably frustrated because we had to go hat in hand to the EEC and to negotiate with them to have approved national measures which we tried to introduce. Farmers are disappointed about that. They also have canvassed for a devaluation of the green £. Although these are understandable frustrations on the part of farmers, we must resist devaluation at all costs.
We must recall that agriculure exports about half of its produce. Only half of it is consumed here. We depend more than anyone on the common agricultural policy. The three pillars of that policy are a common price throughout the community, community preference, preference for community producers and the common external tariff and joint finance of the costs of the common agricultural policy. If we were to involve ourselves in national measures that were not sanctioned by Brussels or were to introduce unilateral devaluation of our currency which would be in breach of the common price, the pillar of the CAP, it would amount to Irish sabotage of a policy that we have the greatest interest in preserving. If we tried to compete with European countries where a very small proportion of the population is involved in agriculture in giving national support to our farm population we would be left seriously behind. We would run the risk of driving ourselves back into the cheap food policy era which we suffered for 50 years under Britain.
Ireland must defend the Common Agricultural Policy. We should take every opportunity to make our case in the strongest possible way in defence of CAP. Many antagonists of the common agricultural policy lose sight of the cost of this policy. It costs about 3 per cent of European spending on food. That is a derisory, small sum considering the amount of subsidies in other areas.
We should also be making the point that although we tend to be a deficit country where intervention occurs frequently that is not to say that it is a national subsidy and that Ireland is getting the benefit of it. The intervention system supports prices throughout Europe. Politicians should be quick to point this out to foreigners who say that all the surplus is in Ireland. We should also be making the point that the Germans and the British, by use of monetary compensatory amounts, are keeping prices high for their own farmers. They are stimulating the over-production they are complaining about. We should be pointing out that there is no common external tariff against cereal substitutes. We have a situation where producers in Europe can import very cheap substitutes for cereals without any tariff on them, which effectively by-pass the idea of the common agricultural policy. They are able to engage in very intensive production of milk.
It is crucial for us to defend the common agricultural policy and we should also be considering our long-term strategy in this area. We cannot forever be seeking maximum price increases and resisting all forms of quota because there is a budget limit on the common agricultural policy—the 1 per cent VAT that is available to agricultural spending. If we break through that barrier, there is a danger that the common agricultural policy will collapse. We should, as the Minister indicated he was considering, present an Irish case for special consideration under any quota measures that are brought in. It is clear that our output level in terms of output per acre or milk yield per cow is way below that in Europe. It would be a better strategy for us to accept some form of quota, provided we could get special consideration for the backwardness of our agricultural policy compared with other European countries. It would be a tragedy if all concessions to reform in the CAP were regarded as selling farmers down the river and if we accepted no change until the CAP crumbled about us and left us in a very serious situation.
Land structure, as Senator Leonard said, is one of the major areas that we have to reform. Many young people could be provided with jobs in farming. Today we passed a measure providing £80 million for youth employment outside agriculture and it is incumbent on us to consider how, by reform of land structure and increasing small farm size, we could encourage more young people to stay in agriculture.
The Government are committed to two measures which will help to improve the availability of land to young people. One is the two years suspension of stamp duty on land transfers to young farmers. The other is a return to the 1975 real threshold for capital acquisitions tax for full-time farmers. This would encourage people to hand over land to young people at a much earlier stage. There is need to deal immediately with long-term leasing. It is something that has been discussed for years and years and as yet there has been no concrete move on it. The 11 month method of the conacre system is a serious impediment to the use of land particularly in tillage farming. The movement to long-term leasing presents problems. There is the problem of preventing a rundown of property and the problem of compensating people for improvements that they made. This is more difficult in the case of land than in the case of fixed property where it is easy to assess such things. There is also the problem of the level of rent on the 11 month system. This is very high and it will be hard to get an acceptable lease at a payment that farmers could afford on a 12 year system. We should move forward with this and perhaps some form of a tax holiday, along the lines of the two year suspension of stamp duty, in respect of the rent for transfers from people over 55 to people under 25 with agricultural training who are willing to take up full time farming would be a easure.
Senator Leonard mentioned the Fianna Fáil White Paper on land policy. I must be honest and say that I am sceptical about the tax subsidy proposal. Only 3 per cent of the land comes on the agricultural market each year. Even if one succeeded in significantly changing the direction of land through a tax and subsidy measure, it would take a long time before any significant contribution to land restructuring was made. The other problem about the tax subsidy proposal is that in the present situation where there is a buyers' market in land, people are forced to sell land as a result of financial difficulties. If the tax was brought in for non-farmers, who in the eastern part of the country buy up a lot of land, the net effect would be that farmers in difficulty would find that their land was unsaleable. The tax subsidy area is not an area to be rushed into. More should be done by way of the long-term lease which would not have a detrimental effect on farmers who were trying to sell in a difficult situation.
Senator Hussey said that since the Coalition Government came into office, interest rates have risen by 5½ per cent from 14½ per cent under the previous Government to 20 per cent. I should like to know what figures he is quoting. It is not my understanding that interest rates last June were anything like 14½ per cent. The whole thrust of the Government's policy is to try to reduce interest rates to farmers. Another point which Senator Hussey made was that the July budget added 5 per cent to the cost of living. The official figure is 3 per cent. He then went on to say that £75 million was taken out of the pockets of farmers by that measure. The present level of family farm income is about £660 million. Even 5 per cent of that does not come to anything like £75 million. It comes to less than half that amount. I draw his attention to the fact that in that budget the Government went out of their way to introduce VAT refunds and reductions in VAT on contractors, measures that were designed to ease the problems caused by the budget on family farms.
The Senator also mentioned the problem of cutting the grant under the farm modernisation scheme. I agree that that was an unfortunate thing to have to do. The Government are promoting in this difficult period a policy of consolidation. They are shifting their emphasis from investment in new buildings towards investment in extra stock, extra fertiliser, extra fodder and towards bringing down the interest costs to farmers on existing borrowings. The Government will stand by that as their major priority at present. There are plenty of instances in my own county of grant-aided buildings which have been built in the past few years that farmers are not in a position to fill with stock. The priority is to raise output and the production of fodder so that we can capitalise on the investment over the past few years. I warmly support the motion before the House that the Government are tackling the problems of the agricultural sector in a very workmanlike manner in difficult times.
I welcome the Minister of State to the House. After a very spirited contribution from Senator Bruton who has set the tone of this debate at the proper level we have to look at the motion to which I am a joint signatory and at the amendment. It is because of the wording of the amendment that one was forced to do research on the figures pertaining to agricultural incomes under the previous Government. I shall put a few figures on the record so that we will be able to look at the realism behind this amendment. Research was carried out into the incomes of farmers at the beginning of this year when the previous Government were still in power. In the first six months their incomes dropped to the income levels of 1980. As Senator Bruton said, that was in a period when direct action could have been taken not alone on the home front but in the European Community where we have allies. We are very fortunate that all our members of the European Parliament, irrespective of which party they represent, are at one in the European Parliament in trying to ensure that the national interests are protected in any review that takes place on CAP as a result of the mandate of 30 May.
It is time now for politicians of all sides, particularly those in Opposition, to stop making political capital out of the agricultural sector which has been going through a crisis period. We should be realistic and act as a team at national level. Farming organisations are forced to picket institutions to try to bring their plight to our attention. We should also act as a team in Europe. I compliment the Minister who will probably be proved by history to be one of the best ever Ministers for Agriculture. The decisions made in relation to agriculture are made at a level at which the Minister, Deputy Dukes, is most capable. It is a system which he has grown up with and worked with and I have great confidence that he will ensure that our national interests are protected.
We hear a lot about co-responsibility levies and super levies. It was in other periods of office that the principle of co-responsibility levies was first accepted. Co-responsibility levies can be accepted if the nations contributing to the surplus are responsible for the usage of the fund in trying to ensure that surpluses are disposed of. The co-responsibility levy, or as it is called in Europe, the fourth principle, is a levy above a certain target level for products. When these targets are met or exceeded the producer is required to contribute a levy known as the co-responsibility levy. In respect of Irish agricultural produce, whether it be cereal, beef or milk, the Irish farming organisations and marketing institutes have ensured that no milk lakes or butter mountains have been created by Irish producers who are a minute contributor to the total products in Europe. When we negotiated our entry to the EEC, nobody in my party objected to the principle of joining the EEC, as Socialists we would be European in outlook, but we objected to the terms of entry. Some of those terms of entry were not to our advantage and have proved so since then. It must be emphasised that it was accepted by existing members that there would be plenty of opportunities for Irish farmers to expand production. This was based on the natural advantage of our country to produce good quality grass with very little imported input. The expansion in production has only barely taken off because the Irish farmer is still very far behind his EEC neighbours. In settling any product target in which the words "co-responsibility levy" should come into being, account should be taken of the legitimate right of Irish farmers to obtain yields similar to other EEC farmers and to do so without penalty.
As regards the super levy I commend the Taoiseach for the initiative he has shown. I hope that we will use our veto in the event of other member states insisting on a super levy. I commend the Taoiseach's initiative in going to see the Socialist Premier of France, M. Mitter-and. Many French farmers are now bankrupt and the French realise that whatever help they can give the farmers will be through the common agricultural policy which is the only policy of any significance in the European Community.
The proposals for change which have been outlined will be the subject of much debate. I have no doubt that our Minister for Agriculture will ensure that our national interest will be protected. Our agricultural output and employment are far higher than in any other Community country. About 14 per cent of our output and 19 per cent of our employment are involved directly in agriculture. The comparable figures for our European neighbours are 4 per cent of output and 8 per cent of employment. An effective agricultural policy is more important to us than to any other member state. Any Minister who represents us in Europe must ensure that any revision of the CAP will take these matters into consideration.
Incomes have been dropping and this motion recognises that. Abount 60 per cent of family farm incomes were less than £2,000 last year. With all due respect that type of income and it has been documented and proven, is even below the subsistence level of those on social welfare payments. We have a responsibility in this area. Taking this year as a whole farm incomes were level with the inflation rate. That leaves farmers no better off but certainly no worse off than they were in 1980. In 1980 the figures were totally unacceptable to us on this side of the House.
There are proposals and packages which have been negotiated and agreed at EEC and national levels. The first one which the Minister mentioned is the EEC interest subsidy. It is a pity that the number of applications from farmers who would benefit is extremely low. If we operate the 5 per cent national subsidy scheme and there is an EEC refund involved in the first scheme, the Government will ask why farmers did not apply for the first scheme which can be supplemented from Europe. We did some research into the numbers who have applied and they are particularly low. It has been proved that many of these are in financial difficulties because they borrowed for productive purposes and were so advised by the ACOT advisory board. Those who improved their farms, restocked, and improved their buildings now find themselves, through input costs and increased interest charges in financial difficulties. If that is the case there is absolutely no reason why they should not apply for the 5 per cent interest subsidy. If they do so they will ensure that we get an EEC refund. Those who do not qualify under this scheme will qualify under the second scheme.
One of the reasons why farmers have not applied is that there is a lack of privacy in offices where they want to discuss their problems. The Minister of State should tell the farm development services automatically to advise each farmer as to what his requirements are, what his borrowing requirements are, what grants he has available to him and what his net deficit borrowings were so that without disclosing any private matter in an office which is not designed as a bank he could bring that information to a banking institution. That should be proof of whether a man is entitled to the 5 per cent subsidy sponsored by the European Community. If we could tidy up that aspect more people would apply for this scheme for which funds are available from Europe. This money is not being made available to people to increase livestock numbers and it is not available for the speculative buying of land which went on indiscriminately without any recourse to finance, earning capabilities per acre or anything else. The money is available only for the purposes specified.
We were disappointed when the scheme announced by the Government of a £100 supplement per cow to build up the breeding stock was turned down by the EEC. That is a pity because that, for the first time in 12 months, had generated confidence. There is destocking. There has been a drastic reduction in the number of animals, particularly cow numbers. For the first time since we entered the EEC we have fewer animals and that situation is intolerable if we are to maintain farming as an important part of our economic development.
The Minister said that the Community have agreed to pay £70 towards each additional animal in that category. It is in the form of a subsidy for borrowing. That should be spelled out in greater detail. We advocate that farmers should maintain and hold their breeding stock. If they have them on hands, having reared them to that stage, instead of being forced through economics to dispose of them they should get this money. They may have to borrow money to do something else if they are forced to retain these stocks but we want them to retain them. I hope there will be confirmation from the Minister of State that that is how the scheme will be applied. That is how the farmers want it to be applied and if it is applied in any other way it will not have the desired effect. I would have the gravest reservations that it would be worthwhile if it were used just as another interest subsidy because it would be putting the farmers into the net of borrowings again. That was not what the Government intended for this fund.
The ACC are also operating the European Investment Agency money which is available to us. Having looked at the application form for that scheme, I see there are 42 financial questions to be answered. Farmers are required under the scheme to submit accounts every three months. I suggest to our Eurocrat friends that in designing a scheme, particularly a financial scheme to aid an industry which has been in difficulty, the maximum amount of red tape should be cut. It is absolutely no value to the agriculture community if this kind of bureaucratic questionaire is to be completed by people who have not the facilities available to them to complete it. The advantages under the scheme could be great if it were made easy.
It is accepted in Europe by people in various parts of the Commission and by members of the cabinet of various Commissioners that money can be available for restructuring farms and development work. Initially it was thought that this would not be the case. If that is not possible we will have to give serious consideration to setting up some type of farming rescue agency, a type of Fóir Teoranta to be applied to agriculture as it is applied to industry and to move towards some common ground for a guaranteed farm income. We should have a plan for farmers so that if they increase production there will be compensation for them. Farmers need this kind of planning now because for too long there has been this stop-go policy.
Senator Bruton referred to some penal taxes that were initiated. My party who have always advocated that farmers should pay a fair share of taxation based on profits still maintain that stand. Farmers maintain that stand now because they realise they do not have profits and therefore they have no worries about taxation. I have said publicly, within my own party and I say it here again today, that never again should farmers be subjected to indistriminate taxation, ignoring their ability to pay because this will be a disincentive to production. If we do that we are on the road to disaster so far as agricultural development and agricultural production are concerned.
I mention the disease eradication schemes because they have created some problems for farmers particularly with regard to maintaining breeding stocks. There are also other facets of the scheme that should be mentioned. I am unhappy about and dissatisfied with the progress of the scheme of disease eradication. In some areas there have been breakdowns because due recognition has not been given to the importance of eradicating disease, particularly tuberculosis. There have been major breakdowns which created much hardship for farmers where they had to adopt a depopulation policy. In that situation farmers should be compensated adequately where they have absolutely no control over a rampant disease. Hardship funds must be applied from the beginning of a breakdown until the matter is completely cleared. That is when the hardship funds should be applicable. I would like a commitment in the review of the budget and in the budget preparation to allocate money to carry out research into the cause of the breakdown. People would welcome this review into the epidemiology of tuberculosis and brucellosis, particularly tuberculosis, where we have made relatively little progress in spite of spending £100 million on the scheme. Where the lack of compensation could put a farmer out of business his special case should be taken into consideration in the national interest.
I want to put on record my disappointment about drainage work. Drainage might not be specifically linked in Europe to the common agricultural policy as it is dealt with specifically under the regional policy. There is no doubt that major river drainage that is required in this country would have direct beneficial effect on the farming community and would bring millions of acres of land back in to production. I visited the Commission and inquired about schemes which are relevant to my own area such as the River Suir and the Shannon and other such schemes. I was disappointed that no application has ever been made by any previous Government to the European Community for money for these schemes in spite of the fact that there was money in the European sector to back them if we had the commitment at Government level to initiate a scheme. That was not done in the past. The Minister of State has made a submission on these grounds involving the drainage of our major rivers and there is a commitment by the European Community through the regional fund to assist river drainage. I hope there will be an active interest taken by this Government in the whole policy of river drainage. It would benefit agriculture, the unemployment situation and the Exchequer from PAYE and PRSI contributions. The EEC grants are very high particularly for the western drainage area and this country could make money from the scheme. They would break even at least on a major scheme like the River Suir where millions of acres of land would be brought into agricultural production again.
The question of the live trade versus the factory is an emotive one particularly for me because the trade union movement is extremely concerned about the lack of employment in the beef industry. We realise that farmers' outlets and their markets must be protected and farmers must ensure that whatever market is available to them is the best possible market. No EEC institution should be instrumental in making it more advantageous for us to put live cattle on to a ship at the expense of jobs in our factories. This problem was dealt with at a recent meeting between the Irish Farmers' Association, the trade union movement and the Irish Meat Exporters Association. It was agreed that the supply to meat factories, which is continuing to decline, is due to the following reasons: the destocking of the national herd, particularly in 1980, not in the past three months, and the smuggling of approximately 130,000 cattle to Northern Ireland. While the overall level of exports of live cattle has fallen, the increase in live exports to North Africa has increased by 30 per cent. This increase in live cattle exports has reversed the progressive decline away from the export of live cattle towards beef exports which has characterised the industry in this country for the past decade. If one combines the legal and the illegal exports of live animals, the overall increase is something like 17 per cent.
The processing industry, in which I am worried about jobs for workers in factories, is working at only 33 per cent of its processing capacity.
We will have to ensure that the EEC institutions do not make it more beneficial for farmers to sell cattle to Libya, irrespective of the balance of payments situation. It is more important to process our national raw material in this country and to have much greater value added to the product when it goes abroad. Intervention should be looked at from that point of view. We should ensure that no such advantages can be gained by one section of the trade over another section. Some of the cattle barons have got very rich and some of the factory managers and privately-owned factories have made millions over the year. I would not like to see the factories having the cream of the market because in 1974 they had very little regard for the farmer. There will have to be at least a minimum guaranteed factory floor price for cattle in order to compete with the live trade. Because of the massive unemployment in the processing industry a three-day week will probably become the norm in most of the factories by the end of this year and is extremely worrying that we are sitting back and taking no action in an area in which the European Community are contributors.
The farm modernisation scheme which is part of the EEC overall common agricultural policy has considerable merit and it has benefited many farmers. Since we entered Europe our total income under this heading is something like £1,700 million. That is a tremendous input from Europe through the common agricultural policy. It is worrying to think that under the farm modernisation scheme 80 per cent of the applicants have failed to get in to the development category. While that system obtains we are benefiting only a minute number of applicants. They have managed because they are progressive or had farms big enough but many of the small family farms who are the life blood of this nation and the backbone of the country are unable to benefit under this scheme. There must be some other interim scheme that would assist farmers in that category to increase production and stock numbers. I do not mind how it is engineered in Europe or what heading it is put under.
We had a farm incentive bonus scheme in the past and that was of considerable benefit. The European Commission now are talking about direct income subsidies. With all due respect to the European Commissioners and everything else, the Irish family farmer and his farm worker are proud people. They do not want hand-outs from Europe. They will accept income subsidies if they are related to production. If they are specifically channelled to productive areas, particularly to small farmers in disadvantaged areas such as the west of Ireland and indeed to some of the disadvantaged areas in the better off counties, they could help people to achieve a further stage in development. This would benefit people who have up to now been hearing about the millions of pounds coming through but which never got to the small man at the farm gate.
The other item which has been touched on is the farm retirement scheme. I was hoping in the beginning that this might prompt some farmers who were uneconomically trying to operate a farm to hand it over to the younger generation but it is a fact that the scheme as agreed in Europe is a complete and total flop. It should be scrapped and we should start working on another scheme. There should be a phased take-over of family farms and there should be incentives to do it instead of the stupid requirement that was written into the farm retirement scheme. Only then will we make any inroads into the question of the handing down of farms by the older people in the industry who have not been able to keep pace with all the varying degrees of production. We have been educating our young people for this job and I hope money will be allocated for the continuing education of young farmers. In the future we will have to ensure that if land becomes available it will be available only to young farmers who will be competent to work it in an efficient manner which will be of benefit to the community as a whole.
I have one other point for the Department of the Minister of State, that is in connection with costings for these various schemes. They are a bone of contention for all of us. The present costings are about two-and-a-half or three years behind present day costs. We have discussed it with the Minister privately and we know he is looking at it. We know that he has financial constraints upon him but there is no doubt that if we are to maintain any progress under these schemes all the costings for grant purposes will have to be updated to present day costings. I do not accept that they should be work costings given by contractors in the area because if State funds are involved we must have some control over them but at least they should be 1981 prices for 1981 work and not 1979 prices. Otherwise there will be no incentive whatsoever to avail of these grants if the amount of money farmers get will not even go towards the cost of some of the materials.
My suggestions are intended to be constructive. We will never be satisfied in the agricultural sector while we are subjected to the restrictions that are placed on borrowings by the financial institutions because of the high interest charges. Pressures have been put on farmers by banking institutions and the farmers had to dispose of stock and land to meet their commitments. That is why stock numbers have been dropping. People have been forced to sell their stock. The new Minister has realised that there are problems in production and income and is going about the matter in a constructive and efficient way. I have confidence in the agricultural sector. If there is any, hope for Ireland it is in her agriculture. We should unite to ensure that we work together within the European Community to protect the national interest of our farmers. We recognise that they are the most important sector of our community.
I welcome the Minister of State to the House and I wish him every success. I support the amendment. In the absence of the proposer of the amendment, Senator Tom Hussey, I want to correct some misunderstanding that Senator Bruton had in connection with the 5 per cent. Senator Hussey said the inflation rate had increased by 5 per cent, not the interest rate. As a result of that, 1 per cent is equal to £15 million and 5 per cent is equal to £75 million. Senator Hussey said that the 5 per cent increase would take £75 million out of farmers' pockets.
There were a few other submissions by Senator Bruton in connection with the 14 per cent that I want to correct. In March of this year Deputy MacSharry negotiated one of the most favourable price rises we had since we joined the EEC providing an average increase of almost 14 per cent. There was a special package worth £52 million providing fertiliser and silage subsidies and doubling beef suckler grants. Earlier in the January budget there was the removing of the rates bill on the vast majority of farmers, the full tax relief on stock and the removal of the disease eradication levy. In October 1980 we had the relief of rates on smaller farmers below £60 valuation, foreign loans at attractive interest rates were obtained and bank co-operation was given in restructuring loans to farmers experiencing difficulties at that time. Extra finance for livestock and headage grants and for the farm modernisation scheme was made available. In April of this year the same Minister obtained final agreement for the western development package providing £300 million to improve the infrastructure of the farming community in the western region over a ten-year period. In May of this year there was a subsidy for in-calf heifers, a nitrogen fertiliser subsidy, a silage-making subsidy and an increase in the boning allowance to meat factories. There was agreement in principle to a 5 per cent interest subsidy for the development farmer and aid for land drainage.
I want to compliment Senator Ferris on his contribution and the equitable submissions he made here this evening as regards both the motion and the amendment. Regardless of what side of the House we are on and whatever Minister may be making the case in Brussels we all know that the best deal possible must be gained for the Irish farmer. We can have a cut at each other here across the floor, politically and otherwise, we can quote figures, we can blame the former Minister for Agriculture, Deputy MacSharry, for not doing his job when in office and we in turn will probably blame the present Minister, Deputy Dukes, for the present situation. Regardless of what way politically we may slant the position as regards the farming community, it behoves us to do whatever we think will bring the best benefits to the farming community as a whole. That is our aim. I am glad to see the Minister of State, Deputy Nealon here this evening because he comes from the same background as I and he represents the same type of people. When I see a Minister from the west listening to me I have no doubt he will understand our plight in the west. Only by living in that region can one realise the disadvantages suffered by the farming community. I was surprised that Senator Ferris had such a knowledge of the disadvantaged areas.
No doubt the Minister of State will understand quite well what I am about to say in connection with sheep subsidies. Up to this year sheep subsidy inspections took place in August and sheep subsidy grants were paid immediately when processing had finished and inspections were carried out. Sheep subsidies have not been paid in the west to date. There is a major confusion between the £9.50 and the £9.60. People may smile at that but they are two female grants, one to the ewe and the other to the housewife. When I go to cumann meetings throughout my constituency and when I start to explain about the £9.50 and the £9.60, I can assure you that everybody is up in a heap when I am finished and there is confusion as to whether I am talking about the ewe subsidy or the housewife's £9.60 because neither of them has been paid to date although they were in the Fine Gael manifesto. No doubt I will put some of the blame on the present Minister of State and on the Minister for Agriculture, Deputy Dukes. The Minister for Finance must accept responsibility for the £9.60. The reason for the delay in the payment of the ewe subsidy is that it is coupled with the cattle headage payment and a ceiling has been fixed for that. Generally the hill farmer has very little stock. If he has ten live units of stock he would be regarded as a fairly substantial cattle man. The Minister should have arranged some method to pay the sheep subsidy as usual. I can assure you it would not exceed the ceiling of both the headage and sheep subsidies. It would have been the right policy to pay the sheep subsidy, retain the cattle headage subsidy until after inspection and then assess the joint income. To date neither the cattle headage subsidy nor the sheep subsidy has been paid to the people in the west. The payment would be very welcome to farmers at this time.
The farm modernisation grant has been reduced and that is something I feel very strongly about. If I was in a position to do so I would increase grants for the housing of cattle in winter time in the west. This would protect the land, it would ensure early grass in springtime and every animal would be on to good grazing in March, thereby giving early beef production. The type of traditional feeding systems that we had in the past do not give any profit at all. The slatted house is the most suitable system for the west and should be promoted, but unfortunately the grant has been reduced. I and every agricultural adviser are advising small farmers in the west not to proceed with the slatted house because it is no longer profitable. The 25 per cent grant is being further reduced and it is no longer profitable to build this type of housing. The solution for the west of Ireland is to take the cattle off the land because of the varying soils and the wet climate in that area. I would welcome any increase. Any increase that the Minister can negotiate will be very welcome in the west of Ireland.
I want to speak briefly about the live export trade as against the dead meat trade. Coras Beostoic agus Feola, The Irish Livestock and Meat Board, in their terms of reference include the promotion of live and dead meat exports. Senator Ferris has an equitable view on this. I felt he, a Labour Party Senator, might have had decided views on this before coming into the Seanad this evening. I warn any Minister for Agriculture that on the day he puts an embargo on the export of live cattle the death knell to the farming community will sound. You know what happened in 1974. If you give the Irish fresh meat exporters a monoply of the trade the farming community will get nothing for their beef. We have had experience ot that in the past and we are going to have it in the future. You must have a balance between live and dead exports and, unless you have that balance, you will not have the increased prices or stability of prices for the farmers.
I hope I will get an opportunity at some later date to give more details in connection with live and dead meat exports, because I feel that a major input of FEOGA grants has gone to the processing meat factories. Most of our dead meat is being exported at present on the hook in fore and hind quarters and very little of it is processed in this country. If we had a boning, pre-pack, vac-pac system here which would enable our processed meat to be sold in supermarkets all over Europe, then out meat plants could go into the processing industry and thus create employment in that sector. This would be good for the cattle trade. The meat plants have received considerable FEOGA grants to enable them to instal boning and processing facilities, but they have not gone into processing because they are getting remuneration and profits easily by sending meat out in fore and hind quarters and leaving the processing to our partners in Europe. I challenge any fresh meat exporter to come before me on radio or television and I will give him the facts about the amount of money being poured into the Irish fresh meat exporters' factories for this type of processing that has never taken place.
I do not want to hold up this motion. I do not know whether we will finish it tonight, but there are many more things I would like to say. Senator Ferris mentioned the drainage question and said that no Department, Minister or official had made any submission to Europe to get additional money for river drainage. I am not certain how we arrived at the western drainage package or whether it was negotiated by the Department or the Minister. Certain rivers in the arterial drainage district—one at the Minister's own back door—are being deprived of additional moneys for drainage. Other major rivers that do not come under the Arterial Drainage Acts and are not the responsibility of the western drainage package should be drained in order to prevent flooding. Grants for that could be negotiated in Europe.
The west has not received any portion of that £300 million package that was negotiated. I hope that in the not too distant future the people of the west of Ireland who are entitled to this £300 million will receive it that it will be seen to be spent in the area it was intended for.
I am glad of the opportunity of speaking on this motion. It will do good if it induces the Ministers and the people on both sides to review the position to date and try to come together as a body to make a contribution in Europe whereby the Irish farmer's lot will be improved as a result of the motion and the amendment combined.
It is my pleasure to support the motion before the House. Having regard to the financial difficulties inherited by the present Government, one can only welcome the substantial increase in financial aid provided by this Government for the agricultural industry. The Opposition have tried to deceive the people into believing that the Government could solve the agricultural crisis. It has been developing over the last two years. This amounts to nothing short of cynical political opportunism, misleading the farming community in an attempt to disguise the facts. The last Government presided over a 50 per cent reduction in farm income since 1979. The Government of the day saw fit to ignore public warnings of the detrimental effects of their policies on the agricultural community. They allowed the national herd during 1980 to be slaughtered off in our factories without taking any steps to prevent that. They allowed the national breeding herd to be completely depleted and again took absolutely no steps to prevent that situation.
I should not have to remind the Opposition that it was they who removed the fertiliser subsidies, imposed the 2 per cent levy on the farming community and left the farmers in 1979, many of whom bought dear stores and fed them for the summer, selling those cattle at the back end of that year and having to pay a 2 per cent levy on cattle which were losing money. They imposed the resource tax, the disease levy and the cost of the 30-day test and they reduced the agricultural grant on rates from £75 to £45. I heard one of the speakers from the opposite side of the House a few minutes ago pointing out that they removed those subsidies and expected to be congratulated about that after they had imposed them two years previously. All of this was done to arrive at some target figure of taxation for the farming community at that time and to remove the benefits obtained from Europe as a result of the positive steps taken by the former Minister for Agriculture, Deputy Mark Clinton, when he represented this country there.
Agriculture has declined since 1979. Senator T. Hussey said that many farmers in the west of Ireland, with their wives and families, were living on an income of £1,000 per year. Were the Opposition aware of this when they were in Government?
