Agriculture: Statements.

Mr. Hussey

First, I welcome the opportunity to take part in this debate this morning. The subject matter we have been discussing for the last half hour could, in effect, have a considerable bearing on our agriculture because we know that, up to the time of the Goodman crisis, we had been exporting a considerable amount of our beef to Iraq and Saudi Arabia. This debate gives the House an opportunity to analyse the major influences, national and international, on a vital sector of our economy and perhaps come up with some ideas on the steps necessary to realise the full potential of the agriculture industry.

Important decisions will have to be made, decisions which in some cases will be very difficult to accept; but we cannot side step the revolutionary change now taking place in agriculture markets in Europe. If reform of the Common Agricultural Policy is necessary, then we should get in there and get the reform best suited to our farmers. Indeed, it must be obvious to everybody now that reform is necessary when we see beef stocks in intervention at 700,000 tonnes and rising, butter stocks at 278,000 tonnes and rising, skim milk powder stocks at 335 tonnes and rising. The cost of the sheep meat regime has doubled in four years as production soars. There are pressures at present to review the sugar regime and perhaps most worrying of all, are the trends in the cereal market where intervention stocks are rising sharply towards 20 million tonnes. Every inch of storage space is filled with unwanted produce that later is invariably dumped on world markets or destroyed, either way at the taxpayers' expense.

The latest estimate shows that the £25 billion EC farm budget will need over £5 billion extra to keep it in operation in 1991, an increase of approximately 20 per cent. Such a policy cries out for urgent overhaul and Commissioner Ray MacSharry has made certain proposals that merit close scrutiny and debate. In this regard, I believe the farm leaders have tried to distort the facts and create confusion among the farming community. It is obvious from the statements that I have heard from those farm leaders that their only concern is for the larger farmers. From 1973 to 1978 the number of farmers dropped by 35 per cent, and most of those would be small farmers. Therefore, what Commissioner Ray MacSharry is trying to do is to prevent the continued flight from the land by allowing the maximum numbers of farmers to enjoy a good standard of living while bringing production into line with consumer demands and budgetary ceilings.

Mrs. Doyle

Does the Senator believe that?

Mr. Hussey

I do believe it, yes. In dealing with this problem he has to have regard to the fact that at present some 20 per cent of farms produce about 80 per cent of total production of support from EC farm funds. Six per cent of cereal producers account for 50 per cent of the surface area and 60 per cent of the production; 15 per cent of dairy farmers produce 50 per cent of the Community milk; and 10 per cent of beef farmers produce 50 per cent of beef cattle.

The linkage of price policy to production has favoured each big farmer compared to every four small and medium sized farmers. The core feature of the reform proposals approved by the Commission suggests the implementation of substantial cuts in price supports in conjunction with redistribution of support. Compensatory measures will be proposed, including direct aids to cushion small and medium sized farmers from the adverse affects of price and quota reductions. Those proposals will achieve a more equitable distribution of funds from the Common Agricultural Policy and will ensure that the small and medium sized farmers will get a greater share of those funds.

This year farmers have seen their incomes drop steeply — a drop which, I would say, would be far greater but for the sharp increase in direct subsidies; and many of those direct payments are on a once-off basis. Indeed, the proposals emerging from the Commission this morning are not very encouraging. Again we see suggestions of a cut in quotas for milk and in many of the other commodities farmers are producing. I know that as yet those are only proposals, but it shows quite clearly the thinking that is emerging from Brussels at present and our Minister will have a tough fight on his hands in opposing those measures and trying to get the best possible deal for our farmers. In that context, I would like to compliment our Minister and his Minister of State on their efforts over the past two years on behalf of our farmers. Those years have been very difficult because of the surpluses that existed and because of other problems, but I am satisfied that our Ministers have acquitted themselves very well and have succeeded in minimising the effects of quota cuts, the BSE scare and all the other problems they had to overcome.

Since our entry into the Community Ireland has received vast amounts, under both the Community's guarantee and guidance funds, for market support and for structural development. Receipts under the guarantee heading since our entry into the Community amounted to £7,900 million and £600 million has been received under the guidance provision. More than 20 per cent of our agricultural exports go to destinations outside the Community, with the support of export refunds.

Therefore, by and large, we have done very well under the Common Agricultural Policy. However, changing circumstances have made the policies which were very useful in the sixties and seventies inappropriate, particularly now. They must be changed and adapted, and rural communities need a lot more activity than farming alone. Rural development has become a very important topic and is being promoted very actively by the Commission and by our Minister. The Community support framework clearly identifies the need to encourage farmers to reorient production towards finding markets and also to assist them in developing alternative enterprises and sources of income.

There are, indeed, alternative enterprises which will be grant-aided, such as sport horse breeding, deer, goat and rabbit production, agri-tourism schemes and forestry measures. Agri-tourism in particular, is a relatively underdeveloped enterprise which offers considerable scope for creating additional income and jobs, particularly in some remote rural areas. During the eighties, and particularly in recent years, there has been a recognition that the strictly economic role of agriculture is contracting and that new economic activities have to be generated if the rural economy and population are to be maintained. There is also the recognition that agriculture has a number of important non-economic roles, such as contributing to the fabric of rural society, a healthy environment and an attractive countryside.

Rural development is not new in Ireland. There are many instances of rural communities coming together and developing a project to improve the local economy. This happened on a large scale in the west of Ireland in the early sixties when we witnessed the establishment of creameries and co-ops that gave a new lease of life to western communities. It was something new to the west at that time. It took a lot of effort then to sell the idea to western farmers; but it succeeded and over the years has provided a reasonable income for farm families. The organisational structures, both formal and informal, which facilitate those initiatives and the commitment of the people who operate them represent an important resource to be built on.

The core economic problem in many rural areas is high dependence on farming and a lack of off-farm employment opportunities. That, coupled with the large percentage of farm heads who are over 65 years of age and low farm incomes, inevitably affects levels of disposal income within local economies, with implications for housing standards and general living conditions. That is the kind of situation which leads eventually to the closure of rural schools, Garda barracks and rural post offices. We have seen in recent weeks the backlash from rural communities at the suggestion by An Post to close down 550 rural post offices.

I would say that there is a need to build up the rural communities. We know that many of the small farmers who are getting an existence from their small farms cannot continue. Over the next ten years, unless there is a great change and great development in the rural areas, we will see many of those people leaving the land. There are very few opportunities out there for them and they are not trained for the jobs that are available in the cities and in the built up areas. We have to try to maintain those families on the land by way of part-time employment, which I consider to be the best answer, if that could be made available. Unfortunately, it is not always possible to provide those jobs. We could also use direct payments, subsidisation and so on. There has to be a greater emphasis on those kinds of things over the next few years unless we are to see many of those families leave the land. That would be a pity, because it is important that we maintain the fabric of rural Ireland and maintain as many farm families as possible on the land.

We could all go on for a long time making suggestions about what should and should not be done, but I believe that there is still a lot of confidence out there. We are in a changing time for agriculture. The GATT negotiations taking place now have very serious implications for Irish farmers. I only hope that the negotiators at the table will think of the many thousands of small farmers who have no alternative but to stay on the land. I hope we will see the results of those negotiations benefiting those people.

Perhaps, now that the Gulf crisis is over, we can see a strengthening of our agriculture base, that we can see agriculture make the progress we would like to see it make. After all, it is our major industry so it is important for us that agriculture would develop and prosper. If we have a thriving agriculture sector, every other sector of the economy follows suit. We want to see agriculture thrive and prosper. I believe, if that is done, we can look forward to good years ahead. Hopefully, the negotiations now taking place will be in our favour and we will see something good coming out of them.

Professor Raftery

When the talk about the GATT and the reform of the Common Agricultural Policy people assume that this is just a matter for farmers. I am afraid that is a very dangerous assumption. What is happening now in relation to the GATT and the proposals for the Common Agricultural Policy will have a huge impact on our entire economy. We are talking of an industry that is providing 42 per cent of our net exports and employing almost 30 per cent of our labour force. We are talking here of changes that will probably cut national income by £500 million, £600 million or £700 million. That will affect everybody in the economy — farmer and non-farmer alike, young and old, employed and unemployed, as well as those who are sick and those who are well. It will have serious implications for our health programmes, education, housing, unemployment, social welfare and so on. Therefore, I would like the Members of this House to dispel the notion that this is just a matter for farmers.

Mr. MacSharry is making proposals which to me are far more serious than the GATT talks or the likely outcome of them. Of course, Commissioner MacSharry is not new to cutting incomes and certainly not new to cutting farmers' incomes. We may have forgotten that during his two years as Minister for Agriculture farmers' incomes dropped by 55 per cent in real terms. I would remind you that four years ago, when Mr. MacSharry was an MEP, he suggested publicly that we should reconsider our position as members of the European Community because of the proposed cut in milk quotas and the cut in agricultural prices. I would suggest that his conversion on the road to Brussels makes St. Paul's conversion on the road to Tarsus seem like a minor event. It is only surpassed, I would suggest, by Paddy Lane's conversion on the road to Strasbourg. The man who was such a staunch defender of agriculture suddenly became ... well, I do not know what has happened to the man. In fairness to Commissioner MacSharry, he got very definite signals from the Government of this country and the previous Government that there was no great committment to agriculture. Sometime ago I got into a public dispute with farm leaders in this country as a result of their failure to highlight Government inactivity and Government lack of committment to agriculture. During that time the editorial page of the Irish Farmers Journal on November 10 read as follows:

On page 11 we publish figures from Senator Tom Raftery accusing the Irish Government of reducing more than any other country the State's spending on agriculture. The figures are official Commission figures and as such must be taken as correct. They are a damning indictment of a lack of Government commitment to the development of Irish agriculture. They tie in very closely with Ray MacSharry's accusation, made at the opening of Clifden Mart last week, that the Irish Government have siphoned off the increases in European Community funded headage payments and reduced the Exchequer contribution accordingly. The present Government is going against the whole spirit of negotiating for increased structural spending and then reducing their own Exchequer expenditure.

The figures I referred to showed that we reduced Government spending on agriculture much more than the average in the Community; in fact, most countries increased it, particularly the strong ones like Germany and Holland. Only Prime Minister Thatcher came anywhere near the cuts in agriculture we had imposed. She was never a friend of agriculture. Agriculture is minuscule in importance in Britain but the British have the most efficient farmers in Europe. Nevertheless, we went down that road. The message was quite clear for the Commissioner and the Commission — they were given the green light to go ahead.

If that were not enough, the western package was not renewed, which is a loss of £10 million a year to western farmers. Then there is the disadvantaged areas saga. It is now more than five years since Mark Clinton, Joe McCartin and myself met the then Commissioner Andriessen because of particularly difficult problems at the time with weather and so on. He agreed in principle to have the disadvantaged area expanded and some of them reclassified when the information was provided. That Government left office; another Government came in. Five years have elapsed and there is still no move. What is worse, the Commission had to come back to the Government four times to get the information they wanted in order to approve the extension of the disadvantaged area and reclassification — all this despite the fact that the Irish Government and Irish Department of Agriculture officials had the experience of twice successfully going before to the Commission for expansion of disadvantaged areas.

I suggest that there must be some kind of collusion there to delay the expansion of the disadvantaged areas and the reclassification. It went further. Let us look at what has happened to our research, advice and education in agriculture — because of cuts more than 30 per cent of all the staff in Teagasc have been let go. We already have a serious technology gap vis-a-vis our competitors. What is it going to be like when we treat our research base like that? The gap can inevitably only grow wider. I am suggesting that this Government did not have and do not have a commitment to saving agriculture, saving the rural areas and having an efficient agriculture to compete.

That brings me to the famous leaked proposals about the reform of the Common Agricultural Policy and, of course, the GATT. It is clear that Mr. MacSharry is going to take a stand on his 30 per cent cut proposed in the GATT. It is equally clear that this is not acceptable to the United States and it is even more clear that the European Community was not going to risk a trade war for agriculture, for the following reasons. Agriculture is now less than 3 per cent of Community GDP. Farmers in the Community are outnumbered by most groups. Even the unemployed outnumber farmers now in the Community as a whole and in every Community country. Finally, the strategic importance of agriculture has been eroded as food surpluses build up in the Community and outside it.

It is quite clear that the Community was not going to risk the trade war and America were not going to accept the 30 per cent cut. What does the Commissioner do? He proposes reforms of the CAP which actually could have been written in Washington. They are to appease the United States, not to help European farmers. These will have dire consequences. Let me put the record straight for Mr. Lane, MEP, for the United Farmers Association and for anybody else who has not heard the truth. This is not a programme which is going to redistribute wealth; it is one more likely to redistribute poverty. The first figure that is thrown around in Ireland is that 80 per cent of the support goes to 20 per cent of the farmers — true for the Community, untrue for Ireland. When you add in all the one-goat farmers with a few olive trees in the south of Italy, Greece and Portugal, of course you get 80 per cent going to 20 per cent for the Community as a whole. But in the Irish context it is more like 58 per cent going to 42 per cent. That is the reality and to be implying otherwise is grossly dishonest and is going to lead to divisiveness among farmers and between farmers and non-farmers.

There is a belief, wherever it came from, among smaller farmers that they are going to get the quota cut that the big farmers are going to suffer. Wrong again. That milk quota quantity is going to leave the country resulting not only in impoverishment of farmers but in a reduction of 400 jobs in the milk processing sector. I would advise farmers now to have a look at the facts, not the fiction, and to take a united stand. I would advise non-farming people to take a very close look at what these proposals are going to do to the economy. They are going to take somewhere between £500 million and £700 million out of the economy. I am telling you that the taxpayers, the PAYE sector, the self-employed and every other sector are going to feel that pinch. There is nothing on the table to compensate us. There is nothing, except talk. There is nothing in the budget. The only thing I can see on offer is the leader programme for rural development which might bring us annually nationally between £6 million and £10 million. That is the quantity of money we are talking about.

Let us talk about the reform of the CAP for a few moments. The suggestion is a cut in quota for milk and a cut in price. That cut in quota allied with the cut in price will cost the dairying industry £60 million. There is a suggestion of similar cuts in beef — and beef, as we all know, is already in serious trouble. There is a suggestion of a cut of 42 per cent in price of cereals. In one stroke that will get rid of all growers over 30 hectares. They could not possibly survive. The smaller ones will be compensated.

But there is something else more devastating about all these proposals. We enjoyed comparative advantage in the production of certain products. In fact, our agriculture is made up of roughly 80 per cent of our grass produced products — beef, milk and sheep — beef and milk making up about 72 per cent, sheep making up another 5 per cent to 6 per cent and, if you add in horses, you go over the 80 per cent. Our agricultural economy is primarily grass based. Reducing the price of cereals means reducing the price of compound feed. It means reducing our comparative advantage. It means that the price of pigmeat and poultry meat will probably drop by about 25 per cent, which in turn means that the market for red meat, beef and lamb, will be decimated.

Our largest single export is beef. You have already heard Senator Hussey pointing out the fact that there are hundreds of thousands of tonnes of beef in storage — about 750,000 tonnes. It is in trouble because of the war in the Middle East. It is in trouble because of perceived health problems with red meat. It is in trouble because of scares about mad cow disease, and it is in trouble because of the bad publicity about the illegal use of drugs. I compliment the Minister on the steps he has taken to try to stop the use of illegal drugs but I urge him to put more effort into it. They should never have been made illegal in the first place. Let us try to change the directive, not break the law.

The beef industry is in serious trouble. Give white meat the kind of advantage it would get with Commissioner MacSharry's proposal and you destroy the beef industry in this country. We will see a move of beef production away from the grass areas of Northern Europe, as happened in the United States, to large feed blocs in the Southern sunshine belt of the Community fed on cheap cereals and maize silage — factory farming at its best which is what we should be against, but this will inevitably happen.

There is no aspect of our agriculture that will not be damaged by these proposals. The most serious aspect is undermining our competitiveness because of the cereal price scheme which he proposes. This is a carbon copy of the American system but, of course, the Americans are dealing with an entirely different situation. They have four times as much farmland as the Community and one-quarter the number of farmers. They have cattle and feed lots of up to 60,000 and 70,000 tonnes per head per feed lot. Are we going to go down that road? There is a danger, if Commissioner MacSharry's proposals get through, that that could happen. I am astonished that any Irish person could come up with these proposals. As I have said already, I believe they were written to appease the Americans in the GATT talks. Commissioner MacSharry sees no other way out of it now. The Financial Times on two consecutive days published statements from the US saying how pleased they were about the proposed CAP reform. Why would they not be? It will decimate our agriculture.

Another reason we have such an increase in stocks of skimmed milk powder, butter and beef, is the flood of material coming from Eastern Europe. With the reforms in Eastern Europe, the price of food has shot up. The poor people in Poland, Czechoslovakia and so on can no longer afford to eat these products. They want hard currency so badly they are just pushing them into the Community. These goods have been produced with the kind of technology we are forbidden to use. Of course, we will get a scrap of paper to say they did not use it but that guarantee is not worth the paper it is written on because we cannot check it, and there is no means of checking for residues in the meat. If these proposals go through it will be disaster not just for farming but for the entire economy.

There is a simplistic belief that if the GATT talks are successful and we have huge cuts and support for agriculture, and if the CAP reforms are successful, food will become much cheaper. I am sorry to disillusion consumers on that score. Food will be cheaper but not to the extent predicted for a number of reasons. One, as the supports for agriculture in the US particularly and in the European Community, decline — the US is talking about a 90 per cent cut in export subsidies — the world price for commodities will rise. Two, the price of the raw material as a proportion of the retail price of food is declining. At present, the raw material that goes into a loaf of bread costs 15 per cent of the retail price. Worse still the farmer's portion of what the consumer pays is less than 5p in the pound in most European countries. Before the war it was 30p. That is how prices are going. That is the impact farm prices, farm efficiency and so on are having on food prices. It would be rather naive of consumers and consumer associations to think that they will get a bonanza if all the proposals go through. Ireland will lose. Consumers will gain a little; it will transfer from farmers to the consumers.

Since we export more than 70 per cent of the food we produce, more than 70 per cent of the benefit will go to consumers abroad. The cost to the economy depending on how many things work out, will be between £500 and £700 million.

Minister for Agriculture and Food (Mr. O'Kennedy)

Ba mhaith liom mo bhuíochas a chur in iúl do na Comhaltaí as ucht an rún an-tábhachtach seo a chur os comhair an tSeanaid.

I am very happy to have this opportunity to have a broad debate in the Seanad today because of the major importance of this issue not just for Irish farmers but for the Irish economy. As I have indicated, agriculture and the agri-food sector are of unique importance. What I propose to do is to give a broad presentation to the Seanad, outline the position as it now is and stimulate the debate which I hope will bring forward some useful ideas that I can take into account in the course of the very detailed, difficult and lengthy consultations which he will have on all of these related issues over the next 12 months.

I have deliberately refrained from commenting on unauthorised leaks or reports from the Commission in recent weeks. It would be entirely inappropriate for a member of the Council of Ministers to react to comments, sometimes ill-informed and unfounded, on such leaks. I will, of course, make my position and that of the Government quite clear on whatever proposals are formally presented and will, as I have been doing over the last four years, seek the support of my colleagues on the Council for the protection of this crucial element of our economy.

The fact that the price proposals, which were officially announced by the Commission yesterday, differ in some significant respects from the unauthorised reports underlines the necessity for a Minister to adhere to long established Council procedures to achieve the best results. Others who are not involved in the negotiations are, of course, free to comment in whatever fashion they choose. They, of course, will not be involved in the ultimate Council decision making.

I am ready as always to receive submissions and observations from representative groups and have been available on a regular basis for consultation with the farm organisations as provided in the Programme for Economic and Social Progress. Accordingly, may I say that I regard it as extremely timely that this House should today debate the subject of agriculture.

To give the background to the position, at the most recent meeting of the Agriculture Council in Brussels on 4-5 February, Ministers were presented with a communication in the form of a "Reflections Paper" from the Commission on the development and future of the CAP. The GATT negotiations have recently been resumed at official level and only yesterday, as the House will be aware, the EC Commission adopted its Community farm price proposals for 1991-92. Taken together, these developments make it particularly timely to debate agriculture and so, in addition to awaiting Senators' contributions with interest, I welcome the opportunity which I am now afforded to assure the House that Ireland's interests will be recognised and protected throughout the course of the forthcoming protracted negotiations.

As regards the reorientation of the CAP, I propose to comment solely on the basis of the Commission's Reflections Paper to which I have already referred. Other matters are not appropriate for Government to react to at any time. Everyone in this House will understand that unauthorised leaks that may come from either Government or Community are not a basis for proper, reflective, serious discussion on what eventually will be translated into formal proposals. What we have are the Commission's Reflections to which I have referred.

Mrs. Doyle

Are they mature?

Mr. O'Kennedy

If they had the level of maturity the Senator has perhaps they might reflect that, too. We are aware that last month a more detailed document also emanated from the Commission and gained wide currency. However, as this document has no formal status whatsoever and as its disclosure was unauthorised, I believe Senators will agree that its content would not provide an appropriate basis for discussion at this point.

The Reflections Paper, in short, envisages the most radical overhaul of the mechanisms of the CAP since the policy's introduction. It is submitted by the Commission against the background of a serious, current crisis in Community agriculture: budgetary costs are escalating, up 20 per cent compared with 1990; a number of sectors are displaying chronic imbalance and intervention stocks are mounting rapidly and EC farm incomes do not adequately reflect increased budgetary expenditure on agriculture.

That is an issue to which we should apply ourselves diligently. If extra money is being provided in the budget, which already is tight, we want to see that money reflected in increased income for farmers.

Given this situation, the Commission argues that the fundamental objectives of its suggested radical reform are to reorientate policy socially and economically so as to ensure (i) that sufficient numbers of farmers are kept on the land; (ii) preservation of the natural environment; and (iii) stimulation of rural development. The Commission suggest controlling surplus production and attaining market balance using not only such traditional instruments as price policy and quantitative controls but also making use of extensification and more specific environmental measures. There would, in addition, be a redistribution of support and compensatory measures, including direct income aids which would, it is suggested, cushion small and medium-sized producers from the adverse effects of reduced support. Regional aspects, including the needs of less favoured areas, would be taken on board in the reform exercise.

More specifically, cereals prices would be reduced so as to make them more competitive with imported substitutes and compensation on the basis of an aid per hectare would be paid to all producers with full compensation for smaller producers and partial compensation for others. In the Commission's view, the reduction in cereals prices would, in turn, allow for a downward adjustment of prices in the livestock sector, with livestock farmers being compensated through increased premiums.

The Commission's thinking would also assign farmers a greater role in protecting the rural environment and preserving the countryside and, accordingly, farmers would be encouraged to use environmentally friendly methods and to participate more actively in long term set-aside schemes involving the promotion of afforestation.

In the course of the preliminary Council debate which followed the presentation of the Commission's Reflections — I am satisfied that when we get the precise proposals this issue will engage the Council for the rest of the year — there emerged a general consensus that fundamental CAP reform is now unavoidable. There was, however, a wide divergence of views as regards the precise form which the necessary reforms might take. On the basis of the Council's initial exchange Commissioner MacSharry has undertaken to formulate detailed reform proposals and to present these formally to a future Council. In the light of the general observations from the Council he has undertaken to report those back to the Commission before they introduce the precise proposals which will be the subject of very detailed debate at the Council. As I speak, it is not expected that these proposals will be tabled for some months yet. Therefore to talk in terms of reacting to what is not even presented at this stage does not reflect well on those who make that ill-informed comment. Needless to say, I have already given a clear indication of Ireland's likely priorities in the forthcoming discussions.

In particular, I have emphasised, because we are dealing with principles and directions, that the primary objectives of the CAP, as laid down in Article 39 of the Rome Treaty, are as valid today as when they were originally adopted and that consequently, the future orientation of the policy must be set against this reality. Furthermore, when the Community's GATT offer was finalised in November last, the Commission gave a commitment in respect of complementary measures and I have also indicated that these take on an increased significance in the light of the forthcoming reform. The Commission's commitment involves offering a viable future to Community farmers through addressing the particular requirements of those producers and regions which are most vulnerable. By definition, Ireland is covered by that commitment. Given that our agriculture sector is, in terms of its national importance, three times the Community average and that it contributes more than 40 per cent to our total net export earnings, the promised complementary measures cannot but be an essential yardstick against which I shall measure the Commission's ultimate presentation to the Council.

I will put the significance of this dynamo of the Irish economy in context in another way: it is not just that it accounts for 20 per cent of employment; it is not just that it maintains socio-economic stability in our country; it is not just that the values of rural communities are essential to maintaining a healthy attitude or that most of the social breakdown is occurring in congested conditions in our cities; it is not just for those reasons that the rural communities and the values of the rural communities are essential. Even if you look at it coldly in terms of economics, in terms of our balance of payments it is the equivalent of all of the rest of manufacturing industry. Therefore, the debate here is not just a matter of interest for people from rural communities. It is a matter of vital interest for everybody and for every sector of the community. The same should apply in other countries as well.

For me — and I have already stated this in the Council — it will also be essential that whatever concrete proposals are eventually tabled will not be such as would undermine the effectiveness of the CAP which, I would argue in any forum, is a policy which during the years has generally served the Community very well. In this regard it is important to note that the Commission acknowledges that, whatever the nature of the proposed reforms, the CAP must continue to be based on its fundamental principles: a single market, Community preference and financial solidarity. On the last point, I stress that it is the Community who must underpin financial solidarity and not the individual member states. This was one of the reasons why we made our commitment to join the Community. We recognised that the capacity of the taxpayers to sustain a viable vigorous farming community was altogether too limited. I will always resist any attempt to denationalise the Common Agricultural Policy and throw back the burden on member states — in this instance on the Irish taxpayer — to support what is by definition a Community obligation. Both the Irish taxpayer and farmer would lose if I were to adopt any other position.

I accept that we must be prepared to modify specific policy instruments in accordance with market or budgetary requirements. In addition, any GATT agreement in relation to agriculture will necessitate adjustment to internal support levels. We must be careful, however, not to make adjustments which go beyond the strict requirements of the exigencies I have just referred to. In this connection, I reiterate that the additional agricultural expenditure incurred through German unification — a very positive welcome development — should not be chargeable against the existing budgetary guidelines in agriculture. Farmers in the European Community should not be unduly burdened or penalised for any political developments that may arise, be it in Europe generally, in aid programmes for the Soviet Union or access from Eastern Europe where agricultural economies were decimated under the outdated totalitarian systems they had in place up to recently. We are ready to help but we cannot do so on the basis that our farmers will be the ones who will pay the full amount.

Time and again the Government stated unequivocally their commitment to ensuring the continued viability of our agriculture and food industry, to maintenance of the fundamental principles of the Common Agricultural Policy and to seeing that Irish vital national interests are safeguarded. Most recently, these commitments, together with a firm undertaking to maintain the maximum number of full-time commercially viable family farm units have been reiterated in the context of the Programme for Economic and Social Progress which is a unique instrument of co-operation with all the elements that make up our society. It is unique in Europe. Others have acknowledged and admired that achievement. I pay tribute to all parties for their commitment which involved discipline and sometimes difficult decisions. It will enable the Government, in partnership with trade unions, employers and farmers, to ahere to a consistent programme to maintain the progress we have made in our economy in recent times. I promise that these commitments will inform my attitude in the coming negotiations.

In the inevitable CAP reform process it is essential that changes should be implemented in a gradual and balanced way. Smaller scale producers must be properly protected but the more commercial and modern element in our agriculture — a larger segment perhaps than is generally realised — must be enabled to continue to operate viably because it is a key element of our food industry which is of vital importance. Without a commercially viable farming element we cannot have a competitive food industry or realistically expect to preserve our rural infrastructure.

In summary then, I will insist that the inevitable CAP reforms should relate to the specific circumstances in which the Community now finds itself, that their implementation should be gradual and balanced as between price and production control, that due account should be taken of the diversity of the Community's agricultural structures, that economies such as ours which have a disproportionate dependence on agriculture will be fully compensated for any adverse consequences of the reform. In this connection, I will seek recognition of the fact that as Irish livestock production is predominantly grass based, we must be fully recompensed for the devaluation of grass and any erosion of our natural advantage for livestock production which would follow naturally from a reduction in cereal prices.

The reorientation proposals lay particular emphasis on the environment. On that basis, we have a very strong case to argue, even on the terms of the Commission's priority that natural grass based production is the best, perhaps the only guarantee of protecting the environment. I will insist that the Commission take that fully into account and do not in any way disadvantage this natural based production which is very different from some of the intense factory farm production procedures that have given rise to very serious environmental problems in parts of Europe, particularly in the north of Europe.

I mentioned already that the EC agricultural prices proposals for 1991-92 were adopted by the Commission yesterday and that they are likely to be presented formally to Ministers at next week's Council meeting. As might be expected in the light of current budgetary difficulties, the Commission's proposals are extremely restrictive and set in a short term time frame. Their primary aim seems to be to prevent the agricultural guideline being breached. According to the Commission, Community farm spending is set to increase by a third compared with last year unless support is immediately reduced. Consequently, the package which will be submitted to Council next week will propose price cuts of varying degrees of severity for all products of significant interest to Ireland. In addition, a cut in milk quotas is envisaged and safety net intervention for beef is to be eliminated.

I need hardly say that these proposals cause me extreme concern. I have already given my first public reaction to the proposals in a statement I issued yesterday. Obviously, I have not yet had an opportunity to consider their implications in detail because all we had at that point were press reports and general summary reports. I know the House would expect that I look into this in great detail. It will be essential for me between now and the Council debate to inform myself on the impact of these proposals on every member state as well as their impact on Ireland because if I go to a Council meeting with 11 colleagues, I have to be fully sensitive to the impact on them as well as on Ireland. If I seek support for an understanding of Ireland's position, I have to, at least, have an awareness of the problems that they address as well. That is how Council negotiations are conducted effectively. To think that it is only a matter of one Minister going out and demanding this or that for this country and pretending that the other 11 do not exist is to ignore the reality. It is to fly in the face of effective negotiation which is based on understanding all the issues for all countries.

On the basis of initial examination it is abundantly clear that livestock would be severely affected. The sheepmeat, cereals and sugar sectors will have to bear cutbacks as will sectors of lesser importance here. This House needs no reminding that 1990 was an extremely difficult year for Irish agriculture and that farm income registered a serious decline for the first time since 1986. Having said that, according to the constant criteria used by governments and not just by this Government it is evident that the comparative position now after three years of continuing increase in agricultural income and one year of quite significant drop is that we are still more than 25 per cent ahead of what we were when this Government took office in 1987.

The international trading environment remains unfavourable and the high level of intervention stocks for the major EC commodities will continue to put pressure on markets for some considerable time. Current developments in the Gulf will undoubtedly have profound political and economic consequences while events in the Soviet Union and Eastern Europe add to the general uncertainty and complexity of the situation particularly in agriculture. In these circumstances and having regard to the likely implications for Irish producers both of the GATT negotiations and the longer term CAP reorientation, it is, in my view, totally inappropriate that the Commission should at this point be proposing such far-reaching adjustments to the various market mechanisms.

I do not deny that the Commission is now under considerable budgetary pressure following a European Council decision or that intervention stocks, particularly of beef and cereals, have again reached unsustainable levels. I would argue, however, that the Commission is still not justified in drawing structural conclusions on the basis of factors which I believe will, in many cases, prove comparatively short-lived. I will give one example from my previous experience. I argued consistently and vigorously against the introduction of the stabiliser mechanism on cereal. The stabiliser tax will not come into effect this year because we have remained within the limits — a figure of under 160,000 tonnes has come out so the stabiliser at least will not eat into this year's income. It has done so during recent years and I argued then that it would not achieve a reduction in budget but would actually force producers to produce more to compensate for the loss they would suffer from a stabiliser tax. That is what happened. The stabilisers tax, instead of reducing cereal production, has led to increased cereal production and to the surpluses that are now all too evident in the European Community.

Mrs. Doyle

And they are going to double it now.

Mr. O'Kennedy

No, that is a different issue, the co-responsibility levy. It is also a fact that the Community's budgetary control has improved in recent years, the present threat to the guideline notwithstanding. I indicated that there is a clear understanding that some exceptional allowance must be made for the budgetary and market consequences of German unification. If we are going to accommodate the welcome development of German unification we must make the appropriate budgetary adjustments on levels which were drawn up before unification.

A Chathaoirligh, my approach to the forthcoming price negotiations will be a constructive one. This, however, does not imply that I am willing to compromise the future livelihoods of Irish producers or that I am ready to contemplate support withdrawal to such an extent that the viability of Irish agriculture and the rural lifestyle which it sustains would be undermined. Accordingly, I am determined to seek substantive adjustment of the Commission's proposals as presented and to do my utmost to ensure that the various commitments the Government have given in relation to agriculture are delivered. In this context I welcome the discussion in the House and I believe that the contributions of Senators will greatly strengthen my own negotiating position.

Two years ago I delayed the Council for two days and two nights when the new beef regime was being introduced because I insisted that I could not risk a free fall in beef prices and I was not prepared to agree to a new regime unless there was a built-in guaranteed safety net which would ensure that that free fall in prices would not take place in Ireland. Through persuasion, insistence and determination or whatever, and not, incidentally, by being less than aggressive — I would only ask those who have other views to consult with my colleagues in the Council where the real issues occur as to how effective that was — we did get the safety net. What we achieved then will obviously not be lightly conceded now and while the Commission propose the abolition of the safety net I will be seeking a safety net that will apply specifically to Ireland for the benefit of producers or at least for alternative mechanisms that would have the same effect. That is the issue we will be addressing for some time.

I would now like to turn to the GATT negotiations as they relate to agriculture. Perhaps it would be appropriate to begin with a quick run through the background to the negotiations and the progress to date. I want to make one point which is not included in the formal text but it is of vital importance. During the course of our Presidency last year, and before we entered into these negotiations, I insisted, as a matter of priority, that, for the first time, the GATT negotiations, as they affected agriculture, would have to be determined by the Agriculture Council.

Senators will know that the GATT negotiations in so far as they relate to external trade negotiations have always been exclusively a matter for the General Affairs Council. At my insistence, however, in consultation with colleagues, we got agreement from the Commission that because of the significance of agriculture in these negotiations they would have to relate to the Agriculture Council and would have to be guided and regulated by the decisions we reached in giving them the mandate for negotiation. We held at least three consecutive meetings of the Council during our Presidency to achieve that and this has been followed by the incoming Italian Presidency.

That has been one of the most significant issues for protecting agriculture in the GATT negotiations because the solidarity which we established was reflected all the way through, particularly at the Heysel negotiations in Brussels at the beginning of this year where we did not accede to the unreasonable American demands. Solidarity that might otherwise not have been there, was a key element and I am determined and confident that this solidarity will remain a feature of our negotiations when they resume now.

The current round of trade negotiations was launched at a ministerial meeting in Punta del Este, Uruguay, in September 1986. At that meeting a commitment was given to enter into a programme of phased and substantial reductions in agricultural supports. It is important to remember that this was the commitment and the purpose in 1986. When I came into Government in 1987 I was faced with that fait accompli. I am not saying it would have been different had I been there but I do want to say that it is significant that every member state was represented there. However, believe it or not, the Irish Government for whom this vital sector was the dynamo of the economy were represented not by the Minister for Agriculture but by the Minister for Education. The Minister for Agriculture in that Administration did not consider it important enough to be present at the beginning of these negotiations. I only hope that when we go to discuss some issues relevant to education in the international fora that I, as Minsiter for Agriculture and Food will not be asked to attend. I want to emphasise that to those from the Opposition benches who from time to time have made the case that all difficulties are of this Government's making with no reference to the views coming from other partners. There was a dismal failure on the part of the Government of the day to make sure that we were represented properly at that discussion.

These current trade negotiations were launched against a background of international trading difficulties and increasing budgetary costs of agricultural support during the seventies and eighties. They were introduced against a background of international trading difficulties and increasing budgetary costs of agricultural support during those two decades. It was due to be completed by the end of 1990. The overall objectives of the round are to further liberalise and expand world trade, stengthen the role of GATT, increase the responsiveness of the GATT system to the evolving international economic environment and to foster concurrent co-operative action at the national and international levels. Negotiations involve 15 subjects including agriculture.

For agriculture, it was agreed that there should be a greater liberalisation of trade and that import access and export competition should be subjected to strengthened GATT rules. That was agreed in 1986. This was to be achieved by improving market access, disciplining all direct and indirect subsidies and other measures affecting agricultural trade and by minimising the adverse effects that sanitary and phytosanitary regulations can have on trade. This effectively committed the Community to reductions in support and to opening up Community markets. Effectively, the commitment was given then. The negotiations since then have concentrated on the extent to which this would happen.

Negotiations continued over a considerable period and it was agreed in mid-1990 that the negotiating parties would submit by last autumn specific offers on reductions in support and protection. This was to pave the way for the conclusion of the negotiations at the GATT Ministerial conference in December in Brussels.

When the offers were submitted it was apparent that there were still quite considerable differences between the parties. This was especially so between the US and Cairns Group on one hand and the Community on the other, who had, for the first time, achieved a source of solidarity.

The US proposed a 75 per cent reduction of specified internal supports over the ten years from 1991 based on average support levels in 1986-88, a 90 per cent cut in export subsidies over 10 years and the elimination of export refunds on processed products by the end of 1996-97. On border protection, the US wanted to convert all non-tariff measures into tariff equivalents which would be reduced by 75 per cent over ten years. In addition, the US proposed that existing access levels for products should be expanded over the period of the agreement and that minimum access levels should be provided to markets where products have no access at present.

I would like to make an observation on the US position. It is now clear from surveys that have been conducted and projections that by the end of this decade, as we turn into the next millenium, 85 per cent plus of the population of the US will live within 150 miles of the coast on either side and the rest of the broad belt will contain 15 per cent of the community. I indicated to Clayton Yeutter in the course of discussions that if that is what they wanted for their society with all the consequential problems of congested cities having no sense of community or inherited culture or of the great richness of rural latitude, I was not prepared to contemplate that that same mistaken sequence would take place in our country.

That is one of the key issues — this so-called market domination is not the only element to be taken into account in these discussions. That is why we are into very protracted and difficult negotiations on this issue. The Americans and particularly their farmers, might learn from the negotiations. Any Senator who has had the opportunity of visiting part of the mid-west of America that were originally thriving agricultural communities will see the position — ghost towns and devastation. Where are the people now? They are in the cities, with all the unfortunate consequences. That is not what we are prepared to accept in our country.

The Cairns Group proposals were generally along similar lines to those of the US. Both place particular emphasis on securing specific commitments in relation to internal support, border measures and export subsidies.

The Community's proposal, which was agreed at Council on 6 November only after long and difficult discussions, proposed a 30 per cent reduction in aggregate support for groupings of the main products over ten years from the 1986 levels with a 10 per cent reduction for other products. Why 1986? Because 1986 was when the process started. The Punta del Este process started in 1986 and we have already taken difficult decisions — many of them difficult for our producers — and I insist on getting credit for the support reductions we have implemented since all of this started in 1986 before the Americans participated.

That is one of the key issues involved in the negotiations. All non-tariff border measures would be converted into tariff equivalents and would then be reduced by an amount reflecting the rate of reduction in support prices. In addition, there would be a rebalancing of protection essentially between cereals and competing products. Export restitutions would not be subject to any specific level of reduction but would be reduced as a result of reductions in support and protection and because of more precision in their calculation. We are prepared to confirm to our GATT negotiating partners that there will be reductions in export subsidies but reductions which will follow automatically as a consequence of the internal support reductions. We are not prepared to say, however, that our primary target is to remove the export subsidies.

That is an issue on which we should be able to expect a reasonable response because we will be able to demonstrate that there will certainly be reductions in export subsidies support as a natural consequence of the internal support reduction which we are prepared to put in place. In addition, the Community would commit itself not to introduce export subsidies for commodities for which they have not been applied in the past. This, in effect, was the basis on which the EC Commission, which negotiates on behalf of the Community under a mandate from the Council, had to conduct the negotiations.

During discussions at Council, considerable safeguards were built into the Community's proposal at the insistence of member states, including Ireland. At the various Council meetings on the GATT offer — seven in all in October and November last which went on day and night — I had been particularly insistent that producers had to be compensated for losses attributable to the GATT outcome. I am glad to say that, in the end, persistence paid off and we secured from the Commision various undertakings on complementary measures, the ensuring of Community preference and a clearer commitment on safeguarding export refunds. Those measures will not be announced unless and until we reach the actual conclusion in the GATT negotiations but the commitment to introduce them is now a firm decision of the Council.

The Commission has accepted that any future adaptations to support arrangements that will be necessary shall take into account the difficult situation of certain categories of producers and certain regions. It has also agreed that the total level of assistance to the less favoured regions should not be reduced as a result of the implementation of the outcome of the GATT negotiations. The Commission, too, has undertaken to submit concrete proposals, supported by appropriate financial solidarity, to ensure a viable future for Community farmers based on, inter alia, reorientation of support and reinforcing structural assistance. All of these commitments are of considerable importance to Ireland and I will be insisting on progress on these moving in paralled with the GATT negotiations.

Little progress was made in the December ministerial meeting because, for the most part, the main parties were unwilling to change their fundamental positions in a number of the negotiating areas, including agriculture. Towards the end of that week of negotiations the Commission negotiators, who act on behalf of the Community in such negotiations, indicated that the Community, subject to certain conditions being met, might be prepared to undertake some commitments on minimum market access and on the volume of products which would be exported with the aid of export subsidies. The Council has not agreed to such an approach and made it clear on several occasions that the Community negotiators had to respect the mandate.

In the event, agreement was not reached at the GATT meeting in Brussels and the US in particular felt that Community's position on agriculture remained insufficient. The Director General of GATT, Mr. Dunkel, was requested to pursue intensive consultations with the negotiating parties to try to bring about agreement in all the areas where there were differences. Those consultations continued over the best part of two months and finally on 20 February, Mr. Dunkel on his own initiative put forward a basis for further negotiations in a number of the negotiating areas, including agriculture,

On agriculture, he proposed that the participants conduct negotiations aimed at achieving specific commitments in regard to domestic support, market access and export competition and towards reaching agreement on sanitary and phytosanitary issues. When Mr. Dunkel presented his ideas in the GATT they were not commented on by me or by the Commission or by the other main participants in the negotiations. There were good reasons for this. They have no status beyond his own conclusions as to what he thought should be done. We will have come back to our discussions with Council and with the Commission. Technical discussion are now due to get underway on a number of agricultural points and these tasks will go on for some time. In the meantime, the US Administration is expected to seek approval in Congress for extension of its fast-track authority and a decision on this may take up to the end of May. It is unlikely at this stage that the GATT negotiations can be concluded before the end of the year.

The CAP reorientation and the GATT negotiations are going to consume all our time during the rest of this year and I hope people will make observations on that basis and give us the benefit of their views and reflections so that we can take them on board. We must not assume that the American position is what is going to emerge nor, in the other instance, that the CAP orientation is already as indicated in some leaks of precise proposals from the Commission.

As I stated earlier, in the GATT round, the Community has been prepared to consider reductions in export support and import barriers in a related way to reductions in internal support. This remains the formal Community position, and I will continue to insist that no offer be made which implies a reduction in any of the mechanisms of the CAP which exceeds the agreed reduction in overall support levels. I will also continue to insist that the Commission must maintain in the GATT negotiations the broad line laid down by the Council of Ministers on 6 November after seven consecutive meetings.

It must be remembered again that it was agreed at Punta del Este in 1986 that reduced support and protection levels should be brought about as a result of the GATT negotiations. So we are faced with that fact. I am not suggesting that if I had been there we would not have reached that conclusion. This was seen as essential if the agricultural trading system was to be made more market-oriented. Given this scenario, my priority is to ensure that the outcome of the GATT negotiations will not preclude the Community from maintaining adequate supports for its agricultural sector and that the impact of reductions in support and protection on agriculture in Ireland and on our economy generally will be kept to a minimum. The compensatory measures to which I referred earlier will be an essential element in any GATT package and I will be insisting that Ireland's interests are fully recognised in formulating the compensatory mechanisms.

The agriculture horizon is certainly cluttered with challenges as never before. The CAP is under the microscope both on the internal Community front and internationally in the context of the GATT. As the title of Commissioner MacSharry's paper suggests, it is a time for reflection — reflection on where the Common Agricultural Policy has brought us and where we go from here. The debate has only started. In common with other Agricultural Ministers, I have put and will continue to put my country's position to the Commission as it prepares to finalise its CAP reform proposals. When the proposals emerge in a few months' time the Council of Agriculture Ministers will commit itself to a thorough examination of them and I expect many months of debate and amendment before a final package emerges. Despite serious misgivings with some elements of the Commission's thinking on CAP reform, I am nonetheless very much heartened by the Commission's continued commitment to maintenance of the fundamental CAP mechanisms. I am confident that, when the Council's consideration of the CAP reform debate concludes and when the GATT commitments fall to be carried through, the Community will be left with an effective Common Agricultural Policy mechanism to see our agriculture through to the third millennium in a state of excellent health.

That is the broad line I wanted to introduce to launch the debate within a reasonable framework. I have to make some observations in addition in respect of the actions that we might take here at home, while always insisting that it is the European Community and the Common Agricultural Policy that must be the fundamental guarantee for our future policy. To put it in context, the total transfers from the European Community will exceed £1.5 billion this year, whereas the contribution from the Exchequer, which includes administrative costs, will be approximately £350 million or £400 million. There one can see the significance of maintaining a common position on policy in the European Community.

I want to refer to a number of areas in which we have the right of initiative ourselves, albeit backed by support from the European Community. One is the matter to which Senator Raftery referred and I have to put on record that what he has presented is inaccurate and I want to correct it. The previous administration did not apply for any extension of the disadvantaged areas in Ireland. The record is there in Agriculture House for anyone to look at. What the previous administration did after the start of a general election campaign in February 1987 — and this record is also in Agriculture House and in the Commission — was to put in a general request to the Commission to reclassify all of the disadvantaged areas in Ireland already designated as severely handicapped. I want to deny what a member of the European Parliament with a Fine Gael interest alleged. It is an outrageous untruth, which I have asked him to withdraw but which he has not had the grace to do, to say that I personally withdrew that application for reclassification. He called it an application for extension. I did no such thing. I was hardly three weeks in my office when the Commission came back very clearly, very directly and very formally rejecting the application that had been submitted on the basis that it did not take into account in any effective way the degree or modulation of handicap in the areas concerned. It is only right that Mr. McCartin, who is a member of the European Parliament, and Deputy Deasy, should give credence to that when they talk about the reports from Brussels, knowing full well that the only report coming from Brussels was that of the said Mr. McCartin. He should now acknowledge that that was not the case.

The second thing I want to say is that the same gentleman, again supported by Deputy Deasy, claimed that the Commission had rejected to a large extent the extension that I submitted. This again was widely reported and again is totally untrue. I do not know why mature, responsible persons represent that kind of position. At present the Commission is finalising its consideration of the Irish submission. I expect that they will decide on my proposal within weeks.

Let me repeat what that proposal is: that the disadvantaged areas hitherto covering 58 per cent of the national territory of Ireland will now be extended to 72 per cent of the national territory of Ireland. I find it a little difficult to listen to unfounded criticism from those who did not extend it by one square perch during their period. I heard Senator Raftery this morning talking about the delay in this matter. They had four years to extent it by even one square inch. It takes detailed surveys — we surveyed over half the country, every second farm — to get such an extension and so that I might persuade my colleagues at the Council of Ministers, where eventually it will be decided, that it has been properly formulated. I am confident that we will get a decision from the Council after it has gone through its procedures.

It is a matter of procedure. All the indications I have are that up to 98 per cent of what we submitted will be accepted. If we got 100 per cent there would be someone, understandably, saying we should have put in for a lot more. We, incidentally, thought that if 2 per cent were going out, we should try to get another 2 per cent in.

We succeeded in doing that too. When they have done that they will then prepare their package to put to the Council. It must go through the working party procedures of the Council before it comes to the Council of Ministers. I cannot change that. I am satisfied that when it comes to the Council of Ministers I will be able to rely on the goodwill and support of my colleagues with whom I have been working in a spirit of goodwill and co-operation over the last four years.

The House will be aware that before anything can be passed into law by the Council there must be an opinion from the European Parliament. Therefore, we can only hope that all Members of the House will communicate with all colleagues in the European Parliament, which I will address, to introduce the urgency procedures so that we get that opinion.

I have decided to set up an appeals procedure for the first time. This will mean that, from the date of the Commission decision in a few weeks time, I will immediately set up an appeals tribunal in which the Department of Agriculture and Food will not be represented. I do not want to be the judge in my own cause by way of appeal or otherwise. We will have two farmers' representatives on the basis of suggestions from the farm organisations, we will have an independent agricultural economists and two other people of impeccable experience and quality. I propose that they would then go on a circuit tour to specific locations to hear the appeals and adjudicate. The results will enable us to have the successful appellants included as well.

Senator Raftery referred to the hormone issue. I recall the same Senator not only opposing the hormone ban which was already in place before I joined the Council — I inherited that position — but actually having to bring it to the attention of his then leader that in the course of a tour of the USA, Senator Raftery actually vigorously argued in America against the European Community ban on hormones, thereby undermining the legal position of the Community and undermining us who were adhering to the European Community law and saying there was no basis in science or fact for it. That was certainly not what you would expect from a representative who had the interests of Irish agriculture at heart. Whether there was a scientific basis was not for me to judge, because it was already decided. I was only concerned that it was the law and if the consumers of Germany, Holland or France do not want hormone treated beef we should not produce it.

The consumer is my best friend, as Minister for Agriculture and Food. I also believe that the consumer is the farmer's best friend. If one or other of us rejects that consumer, then we are going to have a sworn enemy and that is why the insidious attempt on the part of some few in this country to literally undermine our whole beef industry by the application of bela aginis will not be tolerated. There are prosecutions already under way and I want to assure the House that I will not rest easy until such time as those who are engaging in that suicidal, irresponsible action will be brought to book. Irrespective of what kind of arguments they advance, we will not see the quality of our product undermined by an irresponsible few. I have given an outline of the difficulties that are there, but it is one role to try to overcome them.

Another important element that the House might like to address is the programme for rural development. All I wish to say that this point is we anticipated this in advance of any other country in the European Community. I set up 12 pilot schemes. We expended no money except by paying by co-ordinator in each of the pilot areas.

The total commitment of expenditure was about £500,000, and I am glad to say that, as one always felt about rural Ireland, the value we got from those pilot programmes underlines the significance of what is now going to be a nationwide programme. It was a bottom-up exercise. There was no extra money of any kind and something like 268 new jobs and about 600 part-time jobs were created by these communities in their own areas and there is a prospect of an extra 1,000 jobs in those pilot areas.

If we could introduce any industry with that record we would have the brass bands playing in O'Connell Street to bring them in. Here it was being done by the people themselves from the bottom up because of their conviction about their own place. When it goes nationwide — it is in the final stages the House will be aware of the agri-tourism, the deer farming and some aspects we have not touched on yet — it will be a major new component in developing a new dynamic in rural Ireland. I would not have launched it if there had been an implication that this was to be a substitute for farm support and agriculture. This must be complementary and supplementary, and it must be approached in that way.

We must maintain the environment. That is our guarantee of getting a premium price on these markets. The House will welcome the fact that very recently I announced further pilot projects in environmentally sensitive areas. We will go nationwide with them when we get responses from these areas. There is one in the Slieve Bloom area and the other is in west Connemara. The purpose of these projects will be to give grant incentives to farmers to engage in environmentally friendly action or to refrain from using anything, such as fertiliser or nitrates, that could damage the environment. It is essential that we do everything possible to promote that. When people talk about organic farming I would like to think we will be able to demonstrate, by adhering to this policy, that we are not just talking about a small select group who will be engaged in organic farming in Ireland, that the nature of our total production will be, as it traditionally was, organic in the proper sense of that word, and that we would always be able to guarantee the flavour and quality of our produce. We do not get the same flavour now we used to get from the food supplied by the farmers to towns like my own town of Nenagh. This unique flavour must be restored and that is what I wish to see in the promotion of this programme.

Viable commercial farming is essential and I will do everything possible to maintain and protect it, but I also want to say that the small farmer, the small producer, is the core of our society. They feature in our literature — and that is not by accident — they feature in all of the great efforts of the Irish people over the years, and they feature in the sheer generosity and warmth of their character and their struggle against the odds. I will ensure they will be a priority in any action.

I want to give just one example. It is the old story of beart de réir mo bhriathair because there is no point in pontificating if you do not demonstrate it. When the milk quotas were originally introduced — and I was not there then — and we got an adjustment at that time because we had not reached the same stage of production as Denmark and Holland in the operative year of 1983, that the 10 per cent extra that was applied to us to make up for that should have gone into a pool specifically for small scale producers and young producers. If you happened to have a quota of 100,000 gallons an extra 10 per cent gave you an extra 10,000 gallons. If you had a quota of 10,000 gallons you got an extra 1,000 gallons. That was not the proper way to apply that decision to Ireland.

Since coming into this office I have done everything possible, within the overview of quota, to ensure that we righted that wrong, and we got an extra 11 million gallons which was specifically and exclusively for small producers and young producers. I will continue that with whatever I can get in this area. The restructuring scheme that I introduced had one purpose and one purpose only — and I will continue to insist on it and I will penalise co-ops that try to depart from it — to ensure that the power of the cheque book would not determine who buys up the quotas that come on stream but that priority is given to producers under a certain level of quota. I say this not with any sense of envy of or opposition to large scale or efficient producers. Far from it. Small producers can, by definition, and in many cases are, more efficient. I want to give a commitment to the House that I will continue to operate this policy.

Over 18 months ago I asked my Department to apply their minds in a very detached but realistic way to reviewing all aspects of policy in the light of the scenario I have just presented here, to giving me an overview of policy that would at least stimulate debate, ideas and direction. As you will be aware, I received that review about six weeks or two months ago. The only recommendation I immediately adopted — because it warrants very serious discussion and consideration — was the recommendation that there should be a forum set up to consider all of the implications of the issues. I announced on that day, over two months ago, that I was setting up such a forum. Hence it was that I was surprised to see recently in some submission from a party that they were going to request that I set up what I had already announced I was setting up long ago. I do not understand how or why and it took me by surprise.

The consumer is the best friend of the farmer, the guarantee and the lifeline to his success. Therefore, it will be a forum which will involve consumers as well as producers, experts, officials and anyone else that I feel will have an appropriate role to play in the long term, ongoing review of this vital element in our economy.

Gabhaim buíochas leis an Teach as ucht éisteacht leis an méid a bhí le rá agam. Tá seans ag na Seanadóirí an cheist tábhachtach seo a phlé anois. Scrúdóidh mé go géar na pointí a dhéanfaidh siad agus tá súil agam go mbeimid in ann comhoibriú le chéile.

Senator B. Ryan and Senator Dardis rose.

An Leas-Chathaoirleach

Senator Brendan Ryan.

I have not been here as long as some other people but my understanding was that I would be the next to speak.

Mrs. Doyle

Could I be helpful and suggest that if Senator Dardis has a time constraint in terms of this afternoon's proceedings, if the Leader of the House would agree, I would be prepared to go on until 1.15 p.m. In other words, let Senator Ryan in now, then let Senator Dardis in and then break for lunch. Would that resolve any problems?

An Leas-Chathaoirleach

I am calling Senator B. Ryan.

Mr. B. Ryan

Senator Ryan theoretically has half an hour but Senator Ryan also has a time constraint. I am not complaining about this. The Minister honoured the House by giving us a comprehensive, detailed account of his side of a debate in which, to a certain extent, I am an interested observer rather than being a participant. I do not have a vital constituency interest screaming at me about the problems of Irish agriculture. I have, however, a vital constituency interest as a citizen of this country in the future of agriculture. If the House wishes to continue until 1.15 p.m. I will quite happily leave 15 minutes to Senator Dardis as I am going to finish at exactly one o'clock. Normally I would defer to him but I have a time constraint.

Late last year I attended an interesting meeting in the Minister's constituency in Thurles. The meeting was a joint meeting sponsored by unemployed people, trade unionists and an organisation whose publications I read with increasing interest, the United Farmers' Association. These were people who would traditionally have been seen to be protagonists in a conflict. In fact, the interesting outcome was that there was virtually no disagreement on any issue, even difficult and controversial issues like taxation. There was no fundamental disagreement between the organisation and the people it represented, whose claim is that they represent the aspirations of family farmers. I find that intriguing. It is a matter of some regret to me, as a trade unionist, and when the UFA launched their policy document they invited the Irish Congress of Trade Unions to attend and they declined to attend. That is a matter of considerable regret because we are too small for that. Some of the things I have said about Irish farming are among the most critical that have been said in this House. I remember Senator Dardis taking great umbrage at remarks I made some time ago.

Our land is probably the greenest — in the most modern sense — resource we have. We have the least polluted, least destroyed, least damaged agricultural land in Europe. It is because of that that we are in a position to do many of the things the Minister said so well we are going to do in the future. I like the idea very much that we should have the national objective of becoming the organic farmers of Europe. For large areas of continental Europe the aspiration towards organic farming is almost impossible because of the entry of a whole variety of elements into the food chain and into land that will take years to get rid of, if ever. It is a most welcome objective, to which all our policies should be directed. However, there are some areas of agriculture that need to be looked at.

I am always intrigued by the Common Agricultural Policy, speaking as an unreconstructured socialist. I believe in the idea of organising production in a way which facilitates the needs of production, which keeps people working in production, which gives people some protection from the extraordinary uncertainties of the marketplace, which allows us to make decisions that are based sometimes on social as much as on blind economic forces. All of those things are extremely important and the Common Agricultural Policy, at least in aspiration, attempts to do that. What fascinates me is the ideological hop that most of my colleagues in politics do, where they believe in that for agriculture but believe in the direct opposite for everybody else.

I claim the consistency of believing in the imposition of rational thought in all areas of economic activity, not just in agriculture. All of the things the Minister described about the consequences of the depopulation of the central area of the United States could also be used about other areas of activity, about the collapse, for instance, in this country of the textile industry and of the footwear industry, the collapse in my own city of a number of traditional industries because of the imposition of blind market forces.

It is impossible to ignore the realities of the marketplace but that fact should not mean for a second that we should allow those realities to entirely take over our lives. The fundamental value that underlines the Common Agricultural Policy, not that which the Minister articulated but a more fundamental one, is that we believe it is possible to take action within the constraints of the marketplace but within those constraints to make things better than the market would do on its own. That happens to be, in my view, the basis of most of those of us in Irish society who take a left-wing view of the way the world should be organised.

Looking at the Common Agricultural Policy and reading some of the material that has been presented about it, I am disappointed that so far in our discussions while everybody takes in global terms about the income that this country gets from agriculture, about the level of transfer payments from the EC, very little attention, it seems to me, other than the ritual once-a-year genuflection, is paid to the distribution of those benefits in Irish agriculture.

I am not an expert but my good friend Deputy Gregory addressed a question to the Taoiseach in the Dáil on 27 November. These figures may well be familiar and I am sure the Minister knows them. I think that everybody who has any interest in agriculture should reflect on the distribution of income in agriculture. The fact that 60 per cent of the entire income in agriculture goes to the top 20 per cent of farmers is close to Third World maldistribution of income. It is worse than the distribution of income in society at large.

In society at large about 40 per cent of the total income is — I am reluctant to say earned — is claimed by the top 20 per cent of income earners. In agriculture it is 60 per cent, 50 per cent higher. The top quintile in agriculture in 1988 which is the last figure the Taoiseach was able to supply, earned £22,600 per annum. The next quintile was less then £8,000 per annum. That is an extraordinary uneven distribution of income and in whatever reforms are being advocated about farm incomes and about the Common Agricultural Policy it cannot simply be a global shift of money. It has to be a reorganisation which redirects resources in the direction of the 80 per cent of farmers who are in income circumstances which are close to poverty.

The UFA in its remarkably stimulating policy document points out the fact that 25 per cent of the heads of household in the State who are identifiably poor are in agriculture. To have those two extremes of income within that small section of our population is extraordinary. I have never been able to get anybody to give me consistent numbers of farmers in the country because everybody seems to have a different definition. You have within the same group 20 per cent whose income around twice the average male industrial wage, in the bracket where the Revenue Commissioners say there are only 2 per cent of PAYE workers in excess of that figure. At the same time, within the same community, where a sense of solidarity is claimed, you have a quarter of all of those who are poor in the State.

When you look at the figures again you discover that consistently every year the bottom quintile of farmers actually lose money. One-fifth of Irish farmers consistently every year have a negative income ranging from something as small as minus £500 in 1986 to minus £1,300. That does not seem to get the same attention. At least the trade union movement, whatever it does in practice, feels obliged consistently to talk about the problem of badly paid workers. What I have consistently heard from the major farming organisations is an attempt to use global averages to describe agriculture. Global averages would be fair and reasonable, if we had a reasonably fair distribution of income but when you have that loaded distribution of incomes to produce an average which says in 1988 or 1989 the average farm income was £7,520 and when that average disguises the fact that within it there are people ranging from up to £25,000 a year down to negative incomes, then it is a dishonest tactic for large, vocal farm organisations to claim that they are all impoverished when there are sections within that community who are not just all right but well-off. There is, in my view, a conflict of interest in farming between those who have done extremely well out of the Common Agricultural Policy and those who have done extremely badly out of it.

There are a whole series of issues that deserve to be addressed but I do not want to see the Common Agricultural Policy abolished. I believe that there are sectors of agriculture, particularly on the larger side, who could do with a dose of free market economics, something they claim to believe in but which they successfully and consistently avoid. Large commercially sized farmers could do with an exercise in understanding the realities of the marketplace because it seems to me they display all the attributes they usually attribute to other people, particularly a belief that other people owe them an income. Many farm organisations are particularly good at suggesting that people on the dole, in the public sector or in other areas seem to take for granted that others owe them a living. Most farmers, particularly those who have done well over the Common Agricultural Policy, seem to articulate a view which says that someone else owes them an income. What we have in this country is the basis to guarantee many people a good living out of an environmentally friendly, green agriculture and to do that in a way which is socially worthwhile means not only sustaining global support for agriculture through the European Community. It also means working out a system of income distribution within agriculture which means the benefits of that global support do not become concentrated in the hands of a small minority because that level of impoverishment of structural impoverishment, of structural maldistribution of income, will guarantee the flight of increasing numbers of people from agriculture. It is extremely important that when all these major discussions and debates are taking place the issue of farm poverty and the related issue of farm income distribution should be addressed.

One issue that arises from the UFA document which I think deserves immediate and urgent scrutiny is a suggestion from the Economic and Social Research Institute that something like 25 per cent of farmers would appear to be eligible for various forms of social welfare income support but for a variety of reasons do not claim them and do not seek them. It is extremely important, in relation to those farmers who apparently would be eligible because of their income and do not claim those benefits, that the Minister, and the Department of Social Welfare, should urgently find out why, because one of the issues that need to be addressed in agriculture is the issue of poverty in rural Ireland.

Mrs. Doyle

May I suggest that because of the tremendous interest in this debate, and because of the time and attention the Minister gave to it in his contribution — and I thank him for it — that we would consider extending our time beyond 4 o'clock this afternoon? Senators from all sides have been calling for this debate and are getting very frustrated as they see the day moving on and the chances of them making their contribution looking less likely.

An Leas-Chathaoirleach

That is a matter for the Leader of the House and I am sure he will deal with it when the House resumes at 2 o'clock.

Sitting suspended at 1 p.m. and resumed at 2 p.m..

Mr. Dardis

May I begin by thanking the Minister for his attendance here this morning and by welcoming Minister Walsh this afternoon? I was happy that we could accommodate the Minister this morning for his speech which had a great deal of interest. It reflected the seriousness with which he views the whole situation and the whole future within agriculture. I welcome the positive tone of what he had to say and indeed the fighting tone of it. I was encouraged by that because the debate takes place at a time when farm incomes, according to the Department's own annual review, have fallen by more than 11 per cent in the past year and when the future of farming has never been more uncertain than it is at present.

My party, the Progressive Democrats, believe that the GATT, the reform of the Common Agricultural Policy and this year's EC farm price package add up to the most serious threat, not just to agriculture but to the national economy as a whole, since we joined the Common Market in 1973 and possibly since much earlier than that, as far back perhaps as the economic war of the thirties. In my experience I have never known farmers to be more anxious or even confused about their future, and I share their fears. I am at a loss to know how many farmers are going to continue in business during the next five years, given their present income situation and the clear signals of what lies ahead. The capacity of our food industry to be internationally competitive and to contribute to the economic growth of the country through exports is under threat as well.

This has serious implications for job creation. When it is considered that Ireland's agricultural industry accounts for more than 10 per cent of GDP, nearly 15 per cent of employment and about 40p in every £1 we earn from exports, it is not very hard to see that anything that hits agriculture hits the country's overall prospects for economic growth and prosperity. That is why my party take such a serious view of the noises coming out of Brussels on CAP reform and a serious view also more recently of the proposals in relation to the 1991 prices. Perhaps it is not unreasonable to assume that there is some sort of a hidden agenda in the nature of the proposals for CAP reform, and indeed in relation to the price proposals themselves, and that that agenda has something to do with accommodating GATT and finding a position which will allow us to reach a settlement in GATT. It is very important that we reach such a settlement — that cannot be denied — but there must be grave concern that the settlement that is reached might have as a result casualties in the Irish agricultural field.

It is the concern we have which prompted the Progressive Democrats to issue a discussion paper on CAP reform last week and to suggest the the establishment of a national forum which could be used to produce a national consensus on the desired direction of the Common Agricultural Polciy from an Irish point of view. The Minister made some reference to that this morning and I will come to that in a moment. Because there is so much at stake, the views of more than the farming organisations must be sought. Those who supply inputs and services to farming, the people who rely on their living from farming, the buyers and the processors of farm produce, all those people must be involved; but it needs to be much wider than that. It needs to involve the trade union interests, bodies like the IDA, CII and so on should be involved in the national debate. The reason is that the Minister and our negotiators can then go to Brussels and say this is Ireland's united position on this matter. This is what it is going to do to us nationally. We need a nationally agreed position. It was quite noticeable that before Christmas, on the Saturday programme on RTE, chaired by Rodney Rice, both the then spokesman for agriculture in the Fine Gael Party, Deputy Paul Connaughton, and Alan Gillis, the President of the IFA, subscribed to that idea.

I welcome the fact that the Minister appears to have read the document, which he said was from another party but which I assume to be the document we submitted to him, though other parties may have submitted documents also. The Minister said he favours a forum. He mentioned the policy review group of the Department of Agriculture. I had read their document before our discussion paper was released. It says in that document that the group recommend that:

a forum consisting of a limited number of representatives of farmers, food processors, workers, consumers and environmental groups should be convened annually to consider a small number of relevant medium-long term policy themes and to reach agreed conclusions. The Department of Agriculture would set up special internal arrangements to assess the outcome of the forum's work and where possible to use the forum's conclusions in the policy formulation process.

That does not go nearly as far as the type of forum that I and my party envisage. From that point of view, I do not think we were saying something that was new. I am sorry that the Minister feels he had that forum in place beforehand and that we were only restating something he had said already. I do not agree with that. My perception of the forum is a much different one from his. However, I welcome the fact that on the evening we published our paper the Minister said that he was in favour of a national forum. I would like to know when it is intended to hold that forum and what its composition would be.

I also note from the Programme for Economic and Social Progress that the Government gave a commitment to protect Ireland's vital national interest in the context of GATT and CAP reform. I know too that under the Programme for Economic and Social Progress, it was proposed to review national policies with the farm organisation, to discuss compensatory measures for GATT and to negotiate with them a new development programme for agriculture and food sector. Again, I am saying that we should be going further than that because there is such a vital national interest involved here that the maximum participation in formulating our view is desirable, and there are precedents for it; we have had similar fora in the past. I do not regard, as I say, the national forum as being the same as that envisaged under the Programme for Economic and Social Progress, and my party have something broader than that in mind.

I know, of course, that in the short term the Minister is aware of the threat of the latest farm price proposals for Ireland. I was very glad to hear him say — and it is contained in his speech again this morning — that the price proposals were far too severe and that they were not acceptable in their present form. I agree wholeheartedly with that and I am glad he said it. There appears to be elements in the price proposals that go well beyond what was agreed a few years ago by the heads of government. Particularly in the cereals area, I thought we were into an agreement which would last until the end of 1991, but it appears that it is not the case. Undoubtedly the Minister does not have a fight on his hands to resist the Commission's proposals for the 1991 prices, and he has my party's support in that fight. He may be encouraged by the fact that it appears that the Commission itself is by no means unanimous in its view as to what the proposals should be. I hope that as we go beyond the price proposals into the area of CAP reform, the same determination will be there to take on the Commission when it comes to dealing with Ireland's interests in that CAP reform programme.

That is not to say we are against reform. I think at this stage it is apparent that pretty well everybody agrees that there must be some reform, because we do recognise the need to control surpluses. They are indefensible on many grounds, apart from economic grounds. On purely moral grounds it seems quite indefensible that we have these large stockpiles of food while there are people in the world starving, but that is another day's work. It is obviously necessary to control spending in the interest of the European taxpayers, because it is quite apparent that the European taxpayer is not going to tolerate indefinitely paying huge sums of money to keep surpluses or to keep stocks in store. But I think it would be fair to suggest that perhaps the problems which have arisen during 1990 were to some degree a blip caused by the BSE scare, by the Gulf War, by the general reaction to beef consumption and so on. Perhaps the Commission is not entitled to formulate policy on the basis of that one year's experience, although I would support the view that underlying yield trends tend to be growing at the rate of about 2 per cent per year.

The fear is that the supposed compensation to small producers may not be nearly good enough while at the same time the solid middle sized, well run commercial farms which form the productive base of the competitive food processing industry, may be hit so hard that they never recover. I was glad to see the following statement by the Minister this morning:

Certainly, smaller scale producers must be properly protected but the more commercial and modern element in our agricultural — a larger segment perhaps than is generally realised — must be enabled to continue to operate viably. Without a commercially viable farming element we cannot have a competitive food industry or realistically expect to preserve our rural infrastructure.

I would support those sentiments completely and I was very glad to hear the Minister say that this morning.

In relation to reform, the Minister did say in another part of his speech that "the Commission argues that the fundamental objectives of its suggested radical reform are to reorientate"— that word keeps cropping up —"policy socially and economically so as to ensure (i) that sufficient numbers of farmers are kept on the land, (ii) preservation of the natural environment and (iii) stimulation of the rural development". Of course, those objectives are not something that just appeared this year or within the last few months; they have been there for several years. It is quite obvious that the reform will take place within that context.

However, I think it is important to remind ourselves that we have been the subject of reform. The policy has been reformed significantly over the past few years and over the past ten or 12 years price supports have dropped by about 30 per cent. We are a long way down the road to accommodating some of the things which the Americans are demanding of us under GATT. Of course, I do take the point that we want credits for the reductions that have been made since 1986. I think that is a very reasonable point of view to take in relation to the GATT talks.

I am quite prepared to accept that this famous leaked document, with its massive reduction in grain prices and severe cuts in beef and milk may not have been the definitive position and that it may have been part of a softening up process. But at this stage I do not think anyone can be in any doubt as to the direction of CAP reform. Be it a leaked document or be it not, the fact of the matter is that every farmer in the country and everybody in agribusiness is talking about it and wondering about what direction CAP reform is taking us. That is why it demands a political response.

I was quite encouraged this morning with the Minister's positive response in that area. We do have to deal in the world of leaks and the world of documents which may or may not be official. We do it all the time in other areas and I do not see why it should be any different in this one in terms of forming some views on it. I take the Minister's point that those who are not involved in the talks are quite free to comment. I am very pleased that they are free to comment; and, whether they are free or not, I can tell you they will continue to comment because it is such an important matter. We cannot remove ourselves from the need to take views on these matters.

From what I can see the main beneficiary of the reform will be the consumer. I go on the basis of the Reflections document, which does not contain these detailed figures but does contain the thrust of what the Commission's proposals are. There is no doubt that benefits to the Irish consumer are to be welcomed. But because as a nation we export so much of our food the big winners will not be the Irish consumers but the consumers in the other members states of the Community. If we export some of the benefits to those consumers outside the country — and we can argue perhaps that they are entitled to it and that it is very beneficial for us that there would be benefits to consumers — I find it very difficult to understand where the compensation is going to come from to keep Irish farmers in place unless the budget is increased. Perhaps somebody can explain that to me. But from a simplistic economic point of view, it seems to me to be quite apparent that if you move the money somewhere else you deny it to the place you have removed it from.

That is one of the reasons that I really cannot see the logic of the Fianna Fáil MEPs position on this matter. I just do not understand it, I am afraid. We have a situation where the country is deriving, as the Minister said, roughly a billion pounds a year in transfers into the country from the Community. We can argue about whether it is £300 million or £400 million or £500 million that is going to be taken away from that. But if something is taken away it is inevitable that it is going to have some impact on our economic growth, on the figures that have been produced in terms of what our economic growth would be. That is of extreme significance: that the gains which we have made over the last three or four years in turning our economy around cannot be lost, and they must not be lost because of what is happening in Europe or in relation to the Common Agricultural Policy.

My party very much share the desire to preserve viable rural communities and to protect those on farms and elsewhere who are disadvantaged by low income or by poverty. But I think it will be a bad day's work if we find the money for tackling those problems — they are very real problems and there is rural poverty — by taking it out of the pockets of people who are by no means well off themselves but who have invested in their farms. These are family farms. They are not large farms by international standards. These are the people who will be the motor for the food industry into the 21st century. They are the people who will allow Ireland as a food producing nation to compete internationally in markets around the world. They are the core of people who must be protected, along with addressing the income problems of those who are disadvantaged.

The most unfortunate aspect of a lot of the debate we have heard over the past month or so has been the view that there are big farmers v. small farmers and that the only way one group can prosper is at the expense of the other. God knows we had enough of the urban-rural divide and now we are creating a rural-rural divide.

We need to get it into our heads that unless we keep our eyes focused on the effects of these proposals on the overall national farm position, and the national economy, all our farmers and our citizens will suffer. One reason the farmers will suffer is that, in spite of being small by international standards, we are relatively large in terms of the European average size of farm. We have an average size of farm of something of the order of 70 acres or so and it is very much higher than many of the other European countries.

My party believe that those who work hardest and invest most should be rewarded for their efforts. We reject policies which limit access to farming for young energetic people or prevent those who are successful from expanding. Headage payments and direct income supports are the way to look after those who are at the bottom of the income scale. It is important — and I am glad there was reference to this this morning — that we talk about income and not about acres. If you take the relativities between enterprises, somebody with 100 acres of spring feeding barley may be very much less well off than somebody with a 40 acre dairy farm and a 40,000 gallon quota.

Acreage is not the only factor. We have to be concerned about people's incomes; it is the income that they derive from their business and from its associated activities. Irish farmers have invested more than £4 billion in farm buildings, land improvement, machinery and equipment in the past 15 years. Between banks, the ACC and the merchants they owe £2 billion, and we need investors and risk takers in agriculture as in any other area of commercial activity. They must be given the chance to realise a return on their investment. Small farmers must be allowed expand and become viable if they have the ability and energy to do so. There are plenty of examples of that, the most notable being the President of the IFA who was not a farmer and is now a very successful one.

Cost effective and environmentally sensitive production based on sound technology must be allowed make its contribution to the overall competitiveness of an export orientated Irish food industry which supplies high value added products of superior quality. That is very much in line with what the policy review group of the Department suggested. Maximisation of the gross value of Ireland's agricultural output and exports is central to our national welfare and that is the interest which we will have to defend as a country within the Community. That may involve special concessions which we are in a good position to demand. It is not a begging bowl attitude; we are demanding what we are entitled to. We have shown that our special needs can be conceded and accommodated when we look at what happened with the Structural Funds and the Single Market in 1992, where compensation was introduced to do something to offset the losses that may occur.

If the EC is to be consistent it must recognise that Ireland has much more to lose than other member states, because agriculture is about three times more significant a contributor to our economy compared with the European norm. Therefore, it must be reasonable for us to argue that there should be compensation for the disproportionate effect on Ireland's economy of reduced EC support for agriculture. It is worth reminding the Commission of its declaration made in November last regarding GATT when it stated — and I was very pleased to hear the Minister re-emphasise this this morning —

The Commission considers the total level of assistance to the less favoured regions should not be reduced as a result of the implementation of the outcome of the Uruguay Round.

The same argument should apply to the CAP reform.

The shift towards a more market-led approach and away from relying on interventionism as a market of choice is going to happen whether we like it or not, but it must involve a phased reduction in price support to lower but still stable levels of price. This will need to be associated with income support measures for low income farmers and genuine initiatives on rural development which will supplement rather than replace production in agriculture. There has been much talk about rural development and what it can do for rural communities. I subscribe to the view that it can do an awful lot. But the EC must match its talk with proper funding and a proper vision of what it sees as rural development priorities.

Another huge worry from an Irish point of view is that reform may be based on a massive cut in cereal prices. The implications for Irish grain growers are obvious, but what is less obvious and what is more significant from a national viewpoint is that cheap cereals could shift the advantage from producing meat and milk off grass to farms on the Continent feeing high levels of concentrated feed instead of grass. Avonmore produced some figures last week which showed that if the proposals went through the French dairy farmer's margin per gallon over feed cost would decline by about 3½p per gallon, but the Irish farmer's would decline by 7½p per gallon, the reason being that the French farmer feeds far more concentrate feed to get the gallonage he does. We have to ensure that grass and silage are not devalued as livestock feed relative to grain. In addition, it is hard to expect cereal growers to continue to tolerate the importation of 18 million tonnes of cheap cereal substitutes when without them there would be no EC cereal surpluses.

I take the points that were made in relation to the environment, the need to protect it, and how that can be of such enormous advantage to our national food industry, to exports of good, wholesome, environmentally friendly food to the world. We can exploit the advantages we have in that direction. I welcome the measures being taken in relation to protection of the environment and in relation to compensating farmers for measures which they take to protect the environment.

I welcome the Minister's remarks this morning and his commitment to the principles of the CAP, not just to defending issues or finding a way of defending Ireland's interest in the initial price package, but his commitment to the principles of the CAP and what he said in relation to East Germany and the extra money that is costing not being taken away from other producers. I welcome his response. But I feel the Minister has a certain sense of irritation with us all for raising some of the matters which have been raised. But I would say to him that, if it irritates him, I for one will continue to fight for what I believe to be vital interest not just to farmers but to the whole economy. I hope the comments we make are constructive. It is not our intention to challenge the Minister's negotiating position. It is our intention to assist him so that we do not throw away the benefits which have accrued to the economy through prudent management over the last few years.

There is a responsibility to comment on the proposals, whether they be leaked, whether they be reflection papers or whatever, and to shout in defence of Ireland's national interest. It is worth reminding the House that there is a very thin line between surplus and deficit. Food security is an important element of European policy. That policy grew out of a situation where we had a Europe that was hungry, where people could remember a time when they were starving after the Second World War. The industry responded magnificently to the signals it was given. Now we are in the position where we need reform, where we are going to have to adjust the direction of the policy. We saw in 1987 what could happen with grain, when the US had a drought and when world prices came very close to European prices. Something like that can happen again. Look at the environmental consequences of the war in the Gulf. If there is a nuclear accident somewhere, we have not got large stocks to keep people properly fed into the future. We have to be careful that we do not destroy the productive motor which drives our food industry, helps create so many jobs and which will, I hope, contribute significantly to our future economic welfare.

Dr. Upton

I wish to share some of my time with Senator Doyle, if it is agreeable to the House.

Acting Chairman (Mr. Fitzgerald)

Is that agreed? Agreed.

Dr. Upton

This debate is taking place at a very difficult time for Irish farmers. Farmers' income last year declined substantially as they did the previous year. The environment for agriculture is now changing and the prospects for farming getting worse. No purpose is served in not facing up to that reality.

There are three main problems facing agriculture. First, there is the price package which is on offer this year; secondly, the proposed reforms of the Common Agricultural Policy — a hardball version of which has been leaked to the media. I believe that what has been leaked is the shape of things to come. This is part of the political routine followed in these matters. It would be very foolish not to take these leaks seriously and work out what the implications will be for the economy; thirdly, we have the GATT negotiations. As far as Irish agriculture is concerned, it is really a matter of the degree to which we can limit the damage that will result from the GATT negotiations. The full impact of the proposed price package is not fully understood. The newspapers this morning spoke in terms of a £150 million loss in income to Irish farming, and when that is worked out on a per farm basis it works out as a loss of about £1,000 per farm this year.

The great problem I see in agriculture at present is a refusal to think in the long term. We do not think and plan for the future. We need to look at the problems in the food industry and in marketing. We heard more platitudinous nonsense about marketing Irish food than we heard about draining the Shannon in the forties, fifties and sixties, or whenever that great political event ceased. There is also the question of environmental issues which are now very relevant in Irish agriculture.

There is a great need for the food industry and the dairy sector to consolidate. The rate at which that consolidation is taking place is far too slow.

Each day that we fail to take our dairy industry beyond a certain critical mass represents a further loss of potential for agriculture. There are problems in the beef industry which can only be expected to get worse arising from the events in the Gulf over the last few months. That important market has gone. I am one of those who would argue that it is a market that should never have existed given the type of people we were dealing with. There is the abject failure of the food industry to produce branded products which are recognisable on the European market. With the exception of Kerrygold on the German market, there is not a worthwhile Irish brand on the European market. European consumers are unable to go into their supermarkets and purchase what they can be assured is Irish food. That is a terrible failure of this industry. Anybody who doubts the truth of what I am saying need only walk around any European city and observe that Irish food brands are conspicuous by their absence from supermarkets or advertising hoardings. Our greatest failure has been in the area of marketing. The extra money given to CBF for marketing this year is a pittance. It is of the order of a few million pounds. That kind of money simply does not travel.

Our image as a producer of green, pure, healthy food is being put at serious risk. During the summer hardly a week passes when we do not get a food poisoning scare. At present there is the dreadful problem of angel dust, of Beta agiris, and its abuse in the Irish beef sector. Everybody appears to be opposed to these products and the Minister for Agriculture and Food has very rightly declared himself a vigorous opponent of them. The leaders of all the farming organisations are also vigorously opposed to them. Yet the reality is that out of 74 herds tested for angel dust, ten were positive. What is going on? Everybody is opposed to these products and, at the same time, a significant number of them is in use.

There are rumours to the effect that a number of farmers have died tragically as a result of using these products. There are rumours that meat factories encourage farmers to "dust" them with these products. There is very clear incentive for farmers who think in the short term because you are talking about a net gain of £100 per carcase. That is a significant amount of money but it is foolish to use angel dust when we think in terms of the image of Irish food products.

There is the failure of the food industry to face up to the question of the nutritional concerns of consumers. Some Members of this House speak in terms of these nutritional concerns not being properly founded in science and so on. That does not matter because, the reality is that the consumer believes them. That is a fact we cannot afford to dismiss. Even if we dismiss it, European consumers will not dismiss it. Our capacity to influence the views of European consumers is pathetically inadequate given our inability to put products on the market.

In addition to that, there is the destruction of technological supports for Irish agriculture. The farm advisory service has been very seriously curtailed and research in agriculture is diminishing by the year. If we are to generate the type of products for which there is undoubtedly a market in Europe, I am lost to understand how we can do it without technological backup. We have destroyed that technology. On top of that, we had an appalling statement from the chairman of one of these organisations who launched an attack on the people who worked in the organisations. I am talking about Mr. Joe Rea and the way he went on. It was absolutely shocking that it should happen and be just glossed over.

An Bord Gas employ ten people. This is a new agency which we have been led to believe will work wonders. Maybe it will, but they would have to be ten super people. That is the only way the agency could expect to have a serious impact on the food industry.

There are environmental issues to be considered. There is excessive use of fertilisers. These create environmental hazards and we should look very seriously at limiting their use. We should seek to make a virtue of that and enhance our best selling point: we produce food which is healthy and environmently friendly. There is the question of the control of pesticides and herbicides, The controls which exist are grossly inadequate and open to abuse. Farmers are not prohibited from the over-use of these products. There is no effective means of monitoring their use, or ensuring that the people who use these products have the necessary skills to use them. There is the continuing saga of our failure to eradicate bovine tuberculosis.

In recent times we have begun to look at the potential for organic foods. Last year £0.4 million or £0.5 million was spent on it. That is a pittance in terms of developing something for which there would appear to be a worthwhile market. There is the question of the certification of these products. There is the question of the consumer being assured that when they buy an organic product it has been produced in accordance with a clearly defined protocol so that they do not become victims of charlatans who decide to rip them off.

I understand that a pilot study was carried out in relation to development in rural areas. That is worthwhile. I hope the results are of use. In the Programme for Economic and Social Progress there are plans for rural development. I hope those plans come to fruition and I wish we heard more about them. In the future agriculture will not be able to follow traditional practice. We must become invovled in new areas, such as deer farming and so on. There may be a relatively small market for such products. There is considerable scope for developing the tourist side of agriculture and we are only making a start on that. I would welcome any detailed plans that the Minister might have in that area.

If rural Ireland is to develop it is essential that its infrastructure be maintained. The roads are falling asunder, not to mention other types of support. Unless we think in the long term and plan for the development of food products which we can guarantee are healthy, pure and free from pollutants, then we will go through one crisis after another. That is where the future of the industry lies and it will demand a level of commitment and discipline which we have not seen up to now.

Mrs. Doyle

Thank you for allowing me to take the balance of Senator Upton's time. The Minister stated this morning that the agricultural horizon is cluttered with challenges as never before. That says it all. The challenges are there and I hope we can have confidence in our negotiators at all levels to do the enormous job that has to be done. There is confusion in relation to the negotiating position. The Minister this morning said:

Towards the end of the week of negotiations the Commission negotiators who act on behalf of the Community in such negotiations.... The Council had not agreed to such an approach and made it clear on several occasions that the Community negotiators had to respect the mandate...

Are the Commission negotiators and the Community negotiators one and the same body of people? Who are these faceless negotiators faced with the daunting task of unscrambling the clutter and ensuring that Ireland does not come out at the bottom of the pile when it comes to any agreements in relation to CAP reform, the annual price round fixing or the GATT negotiations? We must not confuse these three stands that face us. There are three distinct lines of negotiation before us. The Minister spoke for an hour and 20 minutes this morning but at certain points he was a little disingenuous. I thank the Leader of the House for extending the time for the debate. He said that the price proposals which were officially announced by the Commission yesterday differ in some significant respects from the unauthorised reports, thereby referring to the MacSharry proposal leaks. What officially came from the Commission yesterday and the unofficial leaks on the so-called MacSharry proposal, are two distinct items. There may be some relationship but they are two separate strands of negotiations. Whether he was being disingenuous or deliberately hoping to confuse us I do not know but that is confused thinking.

Let us have it straight. We have the annual price fixing which we heard about yesterday. We have the MacSharry leaked proposals on the overall long term reform of CAP and we have the ongoing GATT negotiations — three areas impacting on and threatening the future of Irish agriculture, the future of all farmers and the future of what many refer to as the small farmer. Could someone please define for me what a small farmer is in European terms? I cannot find the definition anywhere. Is it a five foot farmer, a ten acre farmer, a farmer with low income, a farmer in a disadvantaged area struggling to rear his family? What is a small farmer in the Irish context and in the European context?

Mr. Fitzgerald

They are all small farmers.

Mrs. Doyle

The Senator makes that glib statement. I would have been inclined to think that in terms of global agriculture, Irish farmers were generally small in terms of acreage and herd numbers. One has only to look at America, New Zealand and many parts of Europe to find that our acreage is considered a large acreage on a European average. Our herd size may be small compared to New Zealand but it is big compared to Germany and Holland. Against whom are we measuring Irish farms and farm incomes? We need to know that and have it clearly defined.

How does one make a small farmer a big farmer? At what stage do they become big farmers? Is it when they become commercial, strictly business? We are talking about the big farmer and small farmer without being clear what we are talking about. We know what we are talking about when we speak of a small farmer but one definition of a small farmer is not the same as the European definition. That is why the debate is confused and not going anywhere.

Mr. Fitzgerald

The Minister mentioned a farmer with 75 acres as being a small farmer.

Mrs. Doyle

Seventy-five acres with a European average of 12.5 hectares would make it a relatively big farm.

Mr. Dardis

That is a cereal farm.

Mrs. Doyle

We have never stopped to define it. We have three or four versions of a small farmer and they are all probably reasonable stabs at it. It only underlines the point I am making that we have never stopped to analyse what is a small farmer. We hear this 80:20 ratio being bandied around. The UFA and the Paddy Lanes of this world justify the so-called MacSharry proposals to reform CAP on the basis that 20 per cent of farmers had 80 per cent of the support heretofore in relation to the European Community and CAP. But that is not correct in an Irish context. In a European context, that 80:20 ratio would be right but in an Irish context, the divide is 52:48 when you take out the olive oil, the vines and all the southern European production and the money that has gone into shore up difficulties in that area.

When you talk about northern European agriculture and the main enterprises that represent 80 per cent of agricultural output in this country, 48 per cent of the farmers get 52 per cent of the supports. It is still slightly unbalanced, but I do not think any of us would fall out over that type of ratio. Those figures are there for analysing. It is 52:48 in relation to support received in this country, not 80:20.

Those who see merit in the leaked MacSharry proposals should analyse the proposals in the context of mainstream Irish agricultural production and how they will affect farmers. The fact that they will hit the so-called bigger farmers slightly more than the smaller farmers is no justification because all farmers will be hit where it hurts most — in their pockets — particularly now with a 20 per cent reduction in farm incomes last year alone.

Is it any wonder that Ray MacSharry, the Commissioner for Agriculture, is presiding over this decline in Irish farm incomes, because that is what we are interested in. When he was Minister for Agriculture, farm incomes declined by 55 per cent in two years. Let us not forget that. Am I the only Member who is thoroughly ashamed that any Irishman, regardless of his political base before he left this country, could preside over the destruction of our major industry? I am ashamed when it is pointed out to me that this is the Irishman we sent over and who was appointed Commissioner of Agriculture. We could have expected that he would have understood the problems in Ireland. We must be reminded that he is now a European Commissioner and not an Irish Commissioner. That is a fair enough point but do we disclaim him as our own because of that? How can the Government stand up and accept what is coming from their former Minister for Finance, their former Minister for Agriculture and pretender to the throne once upon a time, but I gather that is no longer the case with him? I am ashamed. When we all go to Europe we support the Irish people in the positions over there. It does not matter what Irish political party they came from. We like to support them because we feel they are doing a good job for our country.

I am ashamed of the so-called leaked proposals. I will talk about them even though they are only leaked and unofficial. The rest of the country is talking about them. The Minister this morning made a valiant effort to suggest that we ignore them because they are not officially on the agenda for discussion. How can we — as Senator Dardis said — ignore it? Throughout the length and breadth of Ireland, in urban and rural areas, the proposed decimation of Irish agriculture by an Irishman, the so-called European Commissioner for Agriculture, is the main topic of conversation.

Mr. Fitzgerald

We do not know them yet. There are 12 months of negotiations.

Mrs. Doyle

I suggest that the leaks on the Common Agricultural Policy reform, the so-called MacSharry proposals, are a softening up process. He has obviously learned a little about psychology. He forgot a lot about Irish farmers and their problems but he has learned a little about psychology since he went to Brussels.

I suggest that this is a softening up process: hit them hard enough and often enough with shocking suggestions and then, after a year's negotiation — as has been quite rightly put — if you up everything on offer by about 5 per cent or 10 per cent they will feel they got a good deal. It is psycho-therapy, psychology at its best. It is carpet bombing. He will not get away with it. He will not fool the Irish farmers; he may fool some of the Irish farm unions. I have a feeling that even the UFA, who were established because they felt the small farmer, that undefined entity, was not getting a fair crack of the whip from the two main farm unions — I understand the philosophy behind their formation — but, with respect, I think they have it wrong on this occasion.

Are our negotiators who will have to fight this battle for the next 12 months or 15 months in terms of the reform of CAP, up to the job of protecting our country and our agriculture? It has been pointed out that we are not just talking about farm incomes; we are not talking about more money in the farmer's pocket; that is not the main issue. Granted the farm unions are entitled to take that angle, but it is not the main problem. The entire economy will be hammered if anything approaching these proposals ends up being accepted.

Forty per cent of our net exports are agricultural based. Thirty per cent of our employment is agricultural based. These proposals will take up to £500 million per annum out of our economy. It will decimate the small farmer. They will leave the land in droves — and there are huge environmental impacts in that alone but where will they come but to our cities and towns with no option of off-farm income on any great scale, with nearly 20 per cent unemployment. The social welfare system will have to absorb many of them. They will look for housing, there will be greater demands on our schools and infrastructural services in our towns. We will be increasing taxes to cope with the influx into villages and towns of those who have been displaced from the land by an Irishman in Brussels. I am thoroughly ashamed that we could even be discussing the proposals so leaked. I am thoroughly ashamed that anyone could even consider such proposals given the level of the devastation they will cause.

I would like to lodge an objection, Acting Chairman, because I think that this situation is totally disingenuous. I had 15 minutes coming to me. Why would I want to take Senator Upton's time?

Acting Chairman

Senator O'Brien.

Mrs. Doyle

This is a disgraceful political performance.

Mr. O'Brien

I would like to take this opportunity of welcoming the Minister to the House and also to thank the Minister for bringing the Bill into the House this morning and delivering such a wonderful speech on it.

Ireland, unlike most other European countries, remains virtually unaffected by the industrial revolution. Throughout that era it remained an agricultural country primarily. However, industry did not remain stagnant but developed at a steady pace and responded to the demands placed on it both at home and abroad. The agricultural scene changed from the production of potatoes and corn through flax in the post war years. It has given birth to the tremendous variety of enterprises we have today.

The co-op movement founded in the late 19th century was the main force in the development of our very prosperous dairy industry as we know it today. The success of that movement is proof of the ability of the Irish farming community to respond to change, to work together and adopt new technology. Unfortunately, the introduction of the milk quota system in 1984 put an end to the expansion of the dairy herd. However, Government aid schemes and the efforts of the development agency have encouraged the establishment of a very substantial suckler herd.

We have also seen the development of the poultry industry and of the mushroom industry and the diversification into new products like yogurts, cheese, flavoured drinks etc. In other words, we have seen the establishment of a processing industry based on raw materials from the agricultural industry. County Monaghan has always been to the forefront in the field of agriculture and related industries. We are leaders in the poultry industry; we have a thriving mushroom industry and play a major role in the beef and pig sector as well as in the dairy sector.

Basic agriculture is still the mainstay in the country. It is based on dairy and store cattle production, mainly. These are the two areas where recent development has had the most devastating effect. A thriving sheep industry has also been badly hit. Over the past 12 months we have seen a drop of 20 pence per gallon in milk prices. On our 30 million gallon quota this means that £7 million has been taken out of circulation in our country. To this add a drop of £80 per store animal which represents a further drop of £4 million. When the 10 per cent rise in costs, adding a further £1 million to the production costs, is taken into account the total adds up to a staggering £12 million. This is equivalent to the loss of 300 industrial jobs.

At present an air of gloom and uncertainty hangs over the agricultural industry because of the GATT negotiations. Farmers are frustrated as it is beyond their control. Many figures are quoted regarding the possible drop in farm incomes. However, we should endeavour to maintain our agricultural industry and develop it further rather than see further decline in members engaged in it, or worse still see our farmers leave the fields to join the dole queues. Because young farmers nowadays are reluctant to go into farming as they see it as a dead end, within a few years all farmers will be old.

I would like to thank the Minister for coming into the House today and giving us an opportunity to debate this very important subject.

Mr. Naughten

In my lifetime or in the lifetime of any member of the farming community things were never before as serious for Irish agriculture. At present the GATT negotiations are putting tremendous pressure on our industry and our greatest single export commodity is consequently under threat. There is also the dismantling of the Common Agricultural Policy to be considered together with the dismantling of the Teagasc service which under the old committee of agriculture or under ACOT did a tremendous job to increase production and introduced new production technology at farm level.

The Minister referred to the commencement of the GATT negotiations in 1986. I believe it was rather childish of the Minister to say that the then Minister for Agriculture was not there when that decision was taken. I have no doubt, knowing the then Minister for Agriculture, that there was a very good reason why he was not there. It has been generally recognised that there are times when Ministers have to be deputised for in Brussels, and the Minister did point out today that even if he had been there at that time he did not suggest that any alternative action would have been taken.

With regard to Structural Funds and the headage payment scheme, the Minister said that there was no application in when he assumed office. That is not correct. The Minister was correct in saying that there was no application to extend the disadvantaged areas but an application was made for the extension of the severely handicapped areas which cover the whole of the west of Ireland. Unfortunately, despite the fact that the application was in that application has not been pressed home by our Government and the headage system is one way of channelling funds directly into Irish agriculture. That is one mechanism which successive Irish Governments have failed to exploit. Farm incomes are dwindling, at present. Last year there was a gigantic drop in farm incomes, whether it was in sheep, beef or dairy farming. Estimated reductions vary from 14 per cent to 21 per cent. I believe it was in the region of 21 per cent and the headage system was one mechanism which the Irish Government could have used to offset this. They could have doubled the present rate of headage payments and doubled the livestock units that were being paid. Unfortunately those options were not taken up.

We all recognise that negotiations on the GATT have major implications for us. I regret very much the stand taken by our EC Commissioner Mr. Ray MacSharry at discussions last August in Limerick when he gave away 30 per cent, which was unwarranted at the commencement of the talks. I believe that the tactic was wrong. Everybody realises that there will have to be changes as a result of the GATT talks but we should have approached these talks in a positive frame of mind and should certainly not have given 30 per cent away before we started.

With regard to the CAP proposals it is regrettable that documents were leaked. The implications of the dismantling of CAP have undermined confidence in farming, particularly in farm investment. The leaked documents suggested that ewe premium payments would be linked into one per acre and that headage payments would be linked into one unit per hectare. These proposals would have a devastating effect on the Irish economy, particularly in the west of Ireland where these payments are now part and parcel of the income of many small farmers. Unfortunately not all of the disadvantaged areas have been reclassified as severely handicapped. The Government should take this step immediately and ensure that headage payments at the maximum rate will be available throughout all of the disadvantaged area. That is one way in which farming incomes may be stabilised. No farmer has the confidence to invest at the present time, nor can they obtain borrowing facilities because the banks do not have the confidence to advance money when the level of farm incomes suggests that repayment may be difficult.

Proposals have been brought forward with regard to payments and farm prices for the coming year. Those proposals will have a devastating effect on Irish agriculture. Milk production quotas will be cut by two per cent for all producers with changes also in the intervention system for butter. We all know that the dairy farmer went through a very difficult period last year. They had been getting a very good income from the production of milk but last year as a result of the reduction in prices many dairy farmers who had borrowed very heavily ran into serious difficulties. This two per cent reduction and the reduction in the butter intervention system is a further stab in the back. The effects will be to reduce the quota on one hand and to reduce the price on the other. The safety net of intervention for beef is being dismantled and this is going to have massive implications for the whole beef industry.

I cannot see how beef farmers can look forward with confidence to the coming year. How can farmers go out and buy store cattle, feed them for the summer with no safety net of intervention at the end? Those two proposals — the intervention system and the two per cent cut in the milk quotas — must be opposed by the Government at the price negotiations in the weeks ahead. There is no way that this country or the Minister for Agriculture can accept the proposals as they are being presented. The situation is also very serious with regard to sheep, cereals, sugar and sugar commodities. All of those cuts must be opposed because such a large percentage of our people depend either directly on farming or on farm-related industry for a livelihood that we cannot allow anything to endanger their incomes.

We have a vital national interest in ensuring that we retain the intervention system as it stands and that our milk quotas are not reduced. An alternative system to the intervention system has been tried before, for instance, with regard to the beef premium, and it does not work. It does not produce the returns we should be getting from it. The only acceptable change is to a direct income system, and the only direct income system that I know of where the framework already exists is the headage system.

We could be paying on double the number of livestock and double the rate per headage unit, but we have chosen not to do so. The reason we have chosen not to do so is that 30 per cent of this comes from the Exchequer. I cannot see the existing system being subsidised by the Exchequer. That is what we are talking about when we contemplate getting into headage payments at the rate of a refund of 70 per cent from the EC. We must retain the system we have until we get an alternative EC funded system because without that the west of Ireland will be devastated. If the proposals which we were told were submitted to the Commissioner were implemented you would have nothing but hunting lodges in the west because the rural community could not be sustained if the type of payments linked to one ewe per acre or one livestock unit per hectare came into play. In my constituency the average size farm is 51 acres of which 77 per cent are fragmented holdings. There is no way in which those farmers could be sustained on that type of payment.

It is estimated that the price proposals announced by the Commissioner would reduce farm incomes this year by £150 million. The agriculture industry cannot take that sort of body blow. I cannot understand, when for the first time since becoming a member of the EC we have an Irish Agricultural Commissioner how he could advance proposals which would have such a devastating effect on the Irish Community. I wonder if the Commissioner fully realises that Ireland is the only island off Europe and that it costs us far more to get our produce to the European market than in the case of any other member of the EC. That position has not been recognised. The Minister has a duty to ensure that our special position with regard to the percentage of our agricultural exports will be protected. We are an island community and must be treated separately from mainland Europe because of this huge cost factor and because we have a vital national interest to protect at all costs.

Statements have been made by farm leaders over the last couple of days on the implications of Commissioner MacSharry's proposals. All of them recognise the danger of those proposals. The Members of this House must recognise them also. As parliamentarians we must impress on the Minister for Agriculture that it is of vital importance that those proposals be rejected out of hand. They cannot even form the basis for negotiation because of the detrimental effect they would have on our economy. Often we read in the newspapers that 80 per cent of the subsidies for agriculture go to 20 per cent of the farming community. None of us can condone that situation. That is the situation on mainland Europe but not here.

In Ireland approximately 60 per cent goes to 42 per cent of farmers. The distribution of milk quotas to smallholders and to young farmers last year was grossly unfair. The Minister referred to the additional quota in 1986 and to the way in which that was distributed. He cannot boast about the way in which the additional quota was distributed last year.

The Minister allowed people to sell their milk quotas, getting from £1.20 to £1.50 per gallon. Some of them received sums of money, up to £200,000. Those people were paid, on the one hand, by the Department of Agriculture to sell their quota and on the other hand paid for getting into sheep. That situation should never have been allowed.

I call on the Minister to reject totally Commissioner MacSharry's proposals for price negotiations for the coming year and to retain the system we have. We should protect our vital national interest and if necessary the veto should be used.

Éamon Ó Cuív

Is dóigh liom gur díospóireacht an-tábhachtach í seo. Tá mise ag roinnt mo chuid ama le Senator Kiely.

We are debating a very fundamental and important subject here today. Much of the ground I would be interested in covering has already been covered by other Senators. It has to be recognised that there are fundamental problems with the CAP as now operated. There is no doubt that the budget and the demands on the budget far exceed that which the original proponents and people who designed the CAP intended. For a long time I have been worried that the CAP was aiding factory-type farming to the detriment of traditional type farming. The methods used to subsidise prices were ones that originally ensured guaranteed prices. Methods of production using imported cereals etc., and particularly of milk, that would not otherwise have been economic were regarded as economic under the Common Agriculture Policy.

I was interested to hear the previous speaker say that the present proposals should be refused this year because our vital national interest was lost when we accepted milk quotas. The conceding of that principle has put the principle of quotas, even for a country with a predominant interest in a particular product, on the agenda and has made it acceptable. Brussels is now controlling what and how much can be produced of any one given type of product to a far greater extent. The consequences of this is a change in the situation which pertained up to recent years where most farmers' income come from the sale of livestock produce. Now an increasing percentage is coming in a cheque through the post. Now the freedom to develop the farm and to increase production on an individual basis is coming under the control of bureaucrats. Many consequences of this are often overlooked. One of the very obvious consequences is a dependancy on accurate form filling. Money you thought you were entitled to, that you applied for, money for which you complied with perhaps 19 or 20 conditions out of 20 or 21, may be lost on account of one error in filling in a form. Thus, a huge proportion may be knocked off your yearly income purely on the basis of form filling.

Another problem that is arising, of course, is the fact that all these schemes are full of conditions. The conditions get more restrictive every year and particularly when they emanate from Brussels they tend to pose severe difficulties for farmers to comply with them. We have examples of conditions in the ewe premium scheme which are totally unworkable in the west of Ireland, when a farmer at no time can estimate accurately how many ewes he has on a hill and has no way of knowing when he loses one. Brussels thinks he can and Brussels lays down the rules. Where a farmer genuinely loses sheep that he is not aware of he can be put out of the ewe premium scheme which nowadays is in hill flock terms up to 50 to 60 per cent of the gross income. It would be equivalent to or more than the net income from sheep on a hill farm. This is very dangerous and is causing great hardship. It is something we have to be very much aware of in negotiations on any new schemes.

As my time is very short, and as I have a few more minutes to speak, I would like to direct my attention towards the alternative methods of subsidising small farmers who have been thrown around. The first one I find is often tossed about, and find it very hard to accept, is the concept of development, of developing tourism, of developing this and that. For many people for one reason or another on small farms, particularly in places like the west of Ireland, the chances of an alternative enterprise are small. Therefore, when development packages are put together under various programmes their chances on an individual by individual basis of availing of them are small because the resources are limited. Therefore, it is foolish to think that that type of development will sustain, on its own, family type incomes.

The second idea that is bandied about is that of headage payments, or the schemes we had in the recent past. Again the situation here is that he who is biggest receives most. This in my view is not a suitable system of subsidising farmers and, certainly, it does not do very much for the smallest in the pack.

The third system that could be looked at would be a combination of strict conditions on environmentally friendly farming and an agreement to operate a scheme replacing present social welfare schemes that would be somewhat akin to the family income supplement scheme now available to PAYE earners. Under that scheme a percentage of the difference between a target income and the actual income of a small farmer could be paid. The advantages of this scheme, of course would be that it would give a regular spread out payment throughout the year, that there would, unlike the present social welfare code, be benefit to the farmer in producing more. Finally, there would be an incentive to get on and work the farm better.

All those issues deserve long and serious debate. As I said in a previous debate, although we are talking about agriculture, although we are talking about farming, what we really need to be talking about on the one hand is the national income. I accept that that is very significant and of paramount importance but, as I said, other people spoke about that. Taking it one by one we must get down to talking and never forget we are talking about farmers. Ba mhaith liom anois mo chuid ama a roinnt leis an Seanadóir Kiely.

Mr. R. Kiely

I am pleased to be able to make a statement on agriculture. I would like to say at the outset that agriculture, one of our most important industries, at present seems to be in trouble. The viability of agriculture is what is really in question. I know that agriculture, a vital industry, can contribute immensely to the economy and is definitely a matter of national interest. The spin-offs from a viable agricultural industry are so great that they add to employment in many areas. They can add to employment in the line of development for building contractors. If there is not enough finance to have a viable agricultural industry we will have more unemployment.

In 1972 we joined the Common Market. The referendum was carried overwhelmingly, and the farmers especially were lusting for the European land of milk and honey. Seán Lemass had spent the previous decade warning old industries to modernise. The Government had provided a big slush fund for updating machinery, but the living was good and the money and the advice were ignored by the majority. Today we wonder why the old sunset industries are falling like ninepins. The miracle is that they struggled on so long.

Ireland is a small country. Therefore, we must in all things, settle for nothing less than excellence. The Swiss did two things superbly. They made the world's best watches and provided the world's best banking service and system. In the Irish case we could and should become the European capital for pure food. In the debate we had on the environment recently we took pride in having such a clean environment to produce food. We have good grass and a clean environment.

Our record as a disease-free island could make us the breeding centre of the Common Market. It would entail hard work. It would entail the banning of all antibiotics and especially growth promoters. Serious consideration should be given to that. The people who are using them are doing so for greed and the full penalty of the law should apply to the guilty people.

Now we are talking about reform in the Common Market and reform of the Common Agricultural Policy will also mean more reliance on the marketplace. Therefore, marketing and marketing of our produce is going to be important. The Single Market will bring about free trade so we need marketing. We must commence a five year to ten year programme to achieve our goal of bringing our finest produce to some of the finest marketplaces in Europe.

To do this I do not think there should be any constraints on agriculture, especially on the production of milk. There is talk that 80 per cent of the benefits go to 20 per cent of the farmers leaving 20 per cent for 80 per cent of the farmers. The important thing is to ensure that whatever benefits are there will be for the benefit of agriculture in the national interest. The Department of Agriculture should not become a glorified Department of Social Welfare. It should be for agriculture and agriculture alone.

I hear a lot of talk of factory type farms in Ireland. I do not see any factory type farms in Ireland. The farmers who did intensify were people who modernised their holdings, who built silage pits and preserved grass grown from the Irish soil. They are not buying in cereals from non-EC countries as other members of the EC are doing. They are the people who are adding to the surplus of milk and butter consumption.

I read in The Cork Examiner today that farmers in County Cork are paying £3 million per week in interest and that in County Limerick, which is a much smaller county, the corresponding figure is £2.5 million. Debts such as this are crippling the farms that developed and this is something the financial institutions should take on board under the direction of the Minister or the Department. These institutions can be very callous with farmers in their dealings with them. That is crippling our agriculture industry also. Whereas in the EC countries milk production decreased, in other countries, including America, consumption of milk increased. This is something that should be taken on board and we should not suffer while other countries are free to produce what they like.

Mr. Hourigan

The statements we are making here today are related to the most serious position Irish agriculture has ever been confronted with. During 1990 agriculture suffered a collapse in prices of a level which until then was unprecedented from the time we joined the EC. All the main sectors of agriculture suffered a major reduction in prices. Comparing 1990 average prices which are the most recent available to us with average prices for 1989 we find that cattle prices were reduced by as much as 12 per cent, milk prices by 13 per cent, sheep prices by 22 per cent, pig prices by over 7 per cent, cereal prices by 6 per cent and potato prices by as much as 26 per cent. The weighted average price reduction for all agricultural products in 1990 as against 1989 was 11.5 per cent. That is very alarming and disturbing. Where do we go from here?

The level of product prices is a major determining factor of national farm income with gross agricultural output valued at £3,358 million in 1989, and net farm income valued at £1,534 million, each 1 percentage point change in product prices would change net farm income by as much as 2.2 per cent if all other factors were held constant.

For some products, notably milk and pig meat, the average price reduction between 1989 and 1990 does not measure the full level of the price fall from peak to trough. For these products point to point price reductions are considerably greater than the average price which implies that the full impact of the price fall on farm incomes will not be fully felt unfortunately until the current year of 1991. There are many tables which illustrate facts and figures which I will not dwell on. This set of figures is based on the Central Statistics Office figures and refers to the price change, the average of 1989 over 1990 for the whole year, and the price change from September to September. The reason I differentiate there is that there is a difference between the full year and a particular point and part of the year.

With regard to cattle for the full year we had a reduction of minus 12 per cent. From September to September we had a reduction of minus 12.7 per cent, milk for the full year was minus 13 per cent and from September to September minus 17.8 per cent. With regard to pigs we had a reduction of minus 7.2 per cent for the full year and minus 3 per cent from September to September. In the case of cereals the reduction for the full year was 6 per cent and 5.9 per cent from September to September. In regard to potatoes the reduction for the full year was 26 per cent and 40 per cent from September to September. The reduction in the case of sugar beet was 0.5 per cent in each case while for vegetables the figures were 2.5 per cent and 3.4 per cent. All agricultural output was reduced by 11.5 per cent for the whole year and by minus 15.1 per cent from September to September. I make these points to show the fluctuations in the whole agricultural sector and how dependent the industry is on monitoring the situation on an ongoing basis, that you cannot take even a one year period at a time and get the full picture.

While Irish farmers — and many of us can remember such times — have experienced a number of major farm income slumps, for example, in 1974, 1980, 1985 and 1986, all the major factors of agriculture were never depressed at the one time. I would like to emphasise this to the Minister.

In those three difficult periods to which I have referred the weather was a major contributing factor, by contrast with the weather conditions in 1990 which from a farming point of view could be considered as above average. There is no record in the sixties, fifties or forties even of a price reduction of the magnitude suffered this year of 11.5 per cent with the possible exception of 1956 when prices fell by almost 10 per cent. It is necessary to go back to the early thirties to find the same level of a drop in nominal prices for farm products experienced in 1990. This is extremely serious. The position is now so grave that I believe reforms of the GATT are extremely serious. It is no harm to refer back a few years. These are CSO figures. I talked about the reduction of income in 1990 of minus 11.5 per cent, in 1985 of minus 0.27 per cent, in 1980 of minus 0.27 per cent and in 1974, funnily enough of plus 1.4 per cent but livestock prices in that year showed a reduction of minus 0.72 per cent. In 1966 the reduction was minus 1.6 per cent, in 1960, minus 2.7 per cent, in 1956 minus 9.7 per cent, in 1954, minus 1.3 per cent, in 1933, minus 14 per cent, in 1932 minus 10.5 per cent and in 1931 minus 12 per cent.

We have before us, therefore, a picture as dismal and as bad as it was in the thirties. Let us not forget that. The value of gross agricultural output has fallen from £3,358 million in 1989 to an estimated £3,128 million in 1990, a reduction of 7 per cent. However, as already indicated, average output prices fell by 11.5 per cent in 1990 but this factor was partly offset by a very significant 5 per cent increase in the volume of agricultural output in 1990. The volume of cattle output, including increased numbers of stock, is estimated to have increased by about 4.5 per cent in 1990. The volume of sheep output increased by almost 20 per cent and pigmeat increased by almost 6 per cent. Milk output was similar to its 1989 level. Significant volume increases were also recorded for poultry and sugar beet. Cereals showed a small decline in the volume of output. Total input services increased from £1,342 million in 1989 to an estimated £1,378 million in 1990.

We could go on from there but I am conscious of time. The position generally is that there is a lack of confidence setting in in agriculture. The input side of agriculture is taking a very major hammering because people are conscious of the reduced output at the other end. When we take all the factors into account gross farm income, that is, farm income before interest on farm borrowings is deducted, fell from £1,727 million in 1989 to an estimated £1,575 million in 1990 a reduction of 9 per cent.

Interest on farm borrowings, to which Senator Kiely referred, increased significantly from £203 million in 1989 to an estimated £254 million in 1990 due to both higher interest rates and an increase in the level of borrowings by farmers. When interest on farm borrowings is deducted, net farm income in 1990 is estimated to have fallen by 13.3 per cent from £1,524 million in 1989 to £1,321 million in 1990.

When the inflation rate of 3.25 per cent for 1990 is taken into account the net farm income in real terms fell — and this is a frightening figure — by as much as 16 per cent in 1990. That is the sort of picture we are dealing with and if we are to interpret those figures the best way we can, we can see a very dire and gloomy situation.

I want to refer briefly to the farm income trends from 1984 to 1990. It is set out here, but I do not have the time to go through it in detail. The trend in net farm income in real terms from 1984 to 1990 shows the income in 1990 6 per cent lower than in 1984. This must be added to the volume of agricultural output, and we saw earlier that we had a reduction of 11.5 per cent in income between 1984 and 1990 and an increase in costs of over £200 million between 1984 and 1990. All these factors together are causing a very major and disturbing situation.

Before I conclude I want to very briefly look at the position with regard to GATT and the CAP which are very topical at the moment. The outcome of the GATT negotiations will dominate Irish agriculture for the next decade. Support reductions will inevitably be translated into price reductions and for some sectors reductions in the volume of production. Within the overall GATT framework the process of the CAP reform is likely to continue. Lower price supports may be partly offset by some increase in direct supports to farmers through livestock premia and possibly the introduction of a direct income aid scheme. The market for beef in the EC is extremely difficult and could be destabilised further by increased cow slaughterings if a further cut in EC milk quota is implemented this year, as proposed clearly in the MacSharry proposals. An additional problem is arising from the importations from Eastern Europe. The EC sheep meat regime is likely to be reviewed in 1991 with the objective of reducing costs.

Reform of the EC cereal regime is also likely to be reviewed this year with the possibility of a significant reduction. The impact of a price fall for dairy products has not been experienced for all 1990 and thus is likely to be further depressed when the full season is accounted for. Overall, a further reduction in national farm incomes seems almost inevitable in 1991. The Central Bank has forecast a significant income decrease and, in fact, the whole position with regard to confidence in agriculture is manifested today by the attitude of the Irish banks and other banks towards lending to agriculture.

It is time the Government recognised the serious position of agriculture and let Mr. MacSharry and others know what has to be done. We are a small island on the periphery of Europe and we must get special treatment if we are to survive.

Professor Conroy

If it is agreeable, a Leas-Chathaoirleach, as we are literally running out of time I will be extremely brief in order to allow my colleague Senator Neville to come in.

We are talking about GATT and other negotiations here. One of the main factors is the alleged butter mountain, the milk lake and so on. This country was once well known as the land of milk and honey and as children we were very pleased that we had a good, healthy diet. Indeed, calcium is still accepted as being very beneficial for growing children and for people of all ages. Recently accepted medical opinion has not favoured butter, milk or cheese but, in many ways, there are no preferable products? A recent extensive and very important report by the UK Medical Research Council, conducted by Dr. Peter Elward, a very distinguished medical and scientific person, indicates that drinking more than one pint of milk a day is a protection against heart disease. It further indicates that taking butter is twice as preferable as taking margarine and similar substitues. The Medical Research Council will carry out further investigations and trials but if these figures are correct, this will be enormously important not only medically but also to our dairy industry.

Mr. Neville

I thank Senator Conroy for sharing his time with me. Because I have so little time I will deal with just one aspect of the matter. The EC Commissioner, Mr. MacSharry, has repeatedly claimed in recent weeks that more than 80 per cent of the benefits of the Common Agricultural Policy is going to the top 20 per cent of EC farmers. He has signalled his intention to change this situation and has implied that family farms in Ireland will benefit from a change in policy. Some MEPs, particularly Mr. Paddy Lane in Munster, have repeated the Commissioner's line and have advocated that these radical changes are of benefit to Irish agriculture. However, data from the EC farm structures survey show that, for the EC top 12, the top 20 per cent of land holders are those with 50 acres or more — in other words, Irish farmers in the region of 50 to 75 acres are in the top 20 per cent of the EC in terms of land area, although data from the Teagasc national farm survey indicate that their average income in 1990 would be in the region of £7,300.

In the EC Twelve only 20 per cent of holdings are over 20 hectares and in Ireland 39.5 per cent are over 20 hectares. Thus Ireland could have more to lose if the top 20 per cent of holdings are to be subjected to the greatest cut in support or excluded altogether from compensation. Ireland has a lower percentage of very small dairy herds, that is herds under nine cows. Most of the small producers in the EC are so small that they could not be relying on agriculture for their livelihood. Almost half of all holdings are less than 12.5 acres, two-thirds of all holdings in the EC are under 25 acres. Clearly, many of these are part-time farmers who have full time off farm employment, particularly in the more prosperous member states. These are likely to already have satisfactory income levels. Others are on subsistence agriculture, particularly in Greece and in Portugal.

My contention is that the submission by Mr. MacSharry that the 28 per cent scenario applies to Irish farmers is incorrect and could have a severely damaging effect on Irish agriculture.

Acting Chairman (Professor Conroy)

When is it proposed to sit again?

Mr. Fallon

It is proposed to sit again on Wednesday next at 2.30 p.m.

Seanad Éireann debate - Thursday, 28 Feb 1991